V O R N A D O C O M P A N Y P R O F I L E
Vornado Realty Trust is a fully-integrated real estate investment trust.
The Company owns all or portions of:
New York:
• 30 office properties aggregating 20.8 million square feet;
• 2.2 million square feet of Manhattan street retail in 46 properties;
• The 1,700 room Hotel Pennsylvania;
• A 32.4% interest in Alexander’s Inc. (NYSE:ALX) which owns seven properties
in the greater New York metropolitan area including 731 Lexington Avenue, the
1.3 million square foot Bloomberg, L.P. headquarters building;
Washington:
• 77 properties aggregating 20.5 million square feet, including 63 office properties
aggregating 17.5 million square feet and seven residential properties containing
2,424 units;
San Francisco:
• a 70% controlling interest in 555 California Street, a three-building office complex
in the financial district aggregating 1.8 million square feet known as Bank of
America Center;
Retail Properties:
• 134 strip shopping centers, enclosed malls, and single-tenant retail assets
aggregating 24.2 million square feet, primarily in the northeast states, California
and Puerto Rico;
Other Real Estate/Investments:
• Merchandise Mart - 5.7 million square feet of showroom and office space
including the 3.5 million square foot Merchandise Mart in Chicago;
• A 25.0% interest in Vornado Capital Partners, our $800 million real estate fund.
We are the general partner and investment manager of the fund;
• A 32.7% interest in Toys “R” Us, Inc.;
• An 11.0% interest in JC Penney Company, Inc. (NYSE:JCP); and
• Other real estate and related investments, including marketable securities,
mezzanine loans on real estate, and a 26.2% equity interest in LNR Property
Corporation, an industry leading mortgage servicer and special servicer.
Vornado’s common shares are listed on the New York Stock Exchange and are traded
under the symbol: VNO.
F I N A N C I A L H I G H L I G H T S
Year Ended December 31,
Revenues
EBITDA (before noncontrolling interests and gains on sale of real estate)*
Net income
Net income per share⎯basic
Net income per share⎯diluted
Total assets
Total equity
Funds from operations*
Funds from operations per share*
EBITDA, adjusted for comparability*
Funds from operations adjusted for comparability*
Funds from operations adjusted for comparability per share*
2011
2,915,665,000
2,246,744,000
601,771,000
3.26
3.23
20,446,487,000
7,508,447,000
1,230,973,000
6.42
2,054,056,000
1,011,411,000
5.27
$
$
$
$
$
$
$
$
$
$
$
$
2010
2,740,681,000
2,180,335,000
596,731,000
3.27
3.24
20,517,471,000
6,830,405,000
1,251,533,000
6.59
1,982,589,000
1,001,173,000
5.27
$
$
$
$
$
$
$
$
$
$
$
$
*
In these financial highlights and in the Chairman’s letter to our shareholders that follows, we present certain non-
GAAP measures, including EBITDA before Noncontrolling Interests and Gains on Sale of Real Estate, EBITDA,
Adjusted for Comparability, Funds from Operations (“FFO”) and Funds from Operations Adjusted for
Comparability. We have provided reconciliations of these non-GAAP measures to the applicable GAAP measures
in the appendix section of this Chairman’s letter and in the Company’s Annual Report on Form 10-K, which
accompanies this letter or can be viewed at www.vno.com, under “Item 7 Management’s Discussion and Analysis
of Financial Condition and Results of Operations.”
To Our Shareholders
Vornado’s Funds from Operations for the year ended December 31, 2011 was $1,231.0 million, $6.42 per
diluted share, compared to $1,251.5 million, $6.59 per diluted share, for the year ended December 31, 2010.
Net Income applicable to common shares for the year ended December 31, 2011 was $601.8 million, $3.23 per
diluted share, versus $596.7 million, $3.24 per diluted share, for the previous year.
Funds from Operations Adjusted for Comparability was $5.27 per share in both 2011 and 2010.
Our core business is concentrated in New York and Washington, the two strongest markets in the nation, is office
and retail centric, and represents 80% of our EBITDA. In the 32 years we have run Vornado, cash flow from the
core business has never declined either in total dollars or on a same-store basis. This was true even in the difficult
recession years of 2008 and 2009.
Here are our financial results (presented in EBITDA format) by business segment:
($ IN MILLIONS, EXCEPT SHARE DATA)
% of 2011
EBITDA
2011
2010
Same Store
Cash
1.8%
1.8%
1.8%
6.4%
3.5%
26.6%
GAAP
(0.1%)
0.9%
0.4%
3.1%
0.5%
26.6%
EBITDA:
New York Office
Washington Office
Total Office
Retail
Merchandise Mart
Hotel Pennsylvania
Alexander’s
LNR
Real Estate Fund
Toys “R” Us
Other (see Appendix 1 for detail)
EBITDA before noncontrolling
interests and gains on sale of real
estate
Funds from Operations
Funds from Operations per share
31.2%
21.7%
52.9%
19.2%
3.7%
1.5%
3.0%
2.1%
.5%
17.1%
100%
617.3
430.0
1,047.3
379.0
72.8
30.0
59.5
41.6
9.3
339.0
268.2
2,246.7
1,231.0
6.42
596.5
433.7
1,030.2
362.4
75.6
23.7
58.4
6.1
.1
340.0
283.8
2,180.3
1,251.5
6.59
This letter and this Annual Report contain forward-looking statements as such term is defined in Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are
not guarantees of performance. The Company’s future results, financial condition and business may differ materially from those
expressed in these forward-looking statements. These forward-looking statements are subject to numerous assumptions, risks
and uncertainties. Many of the factors that will determine these items are beyond our ability to control or predict. For further
discussion of these factors, see “Forward-Looking Statements” and “Item 1A. Risk Factors” in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2011, a copy of which accompanies this letter or can be viewed at
www.vno.com.
2
The following chart reconciles Funds from Operations to Funds from Operations Adjusted for Comparability:
($ IN MILLIONS, EXCEPT SHARE DATA)
Funds from Operations, as Reported
Adjustments for certain items that affect comparability:
Income from mark-to-market of derivative positions in JC Penney
Mezzanine loans loss reversal and net gain on disposition
Net gain on extinguishment of debt
Recognition of disputed receivable from Stop & Shop
Our share of LNR’s income tax benefit, asset sales and tax settlement gains
Net gain from Suffolk Downs sale of partial interest
Net gain resulting from Lexington’s stock issuance
Non-cash asset write-downs:
Real Estate development costs
Investments in other partially-owned entities
Tenant buy-outs and acquisitions costs
Merchandise Mart restructuring costs
Discontinued operations – FFO of real estate sold
Other
Noncontrolling interests’ share of above adjustments
Total adjustments
Funds from Operations Adjusted for Comparability
Funds from Operations Adjusted for Comparability per share
2011
1,231.0
2010
1,251.5
13.0
82.7
83.9
23.5
27.4
12.5
9.8
--
(13.8 )
(30.1 )
(4.2 )
22.2
7.4
(14.7 )
219.6
1,011.4
5.27
130.2
53.1
77.1
--
--
--
13.7
(30.0)
--
(6.9)
--
33.7
(2.3)
(18.3)
250.3
1,001.2
5.27
We use Funds from Operations Adjusted for Comparability as an earnings metric to allow for an apples-to-apples
comparison of our continuing business by eliminating certain one-time items, which in most years have been
significant gains. Adjustments for comparability have aggregated $1,001.2 million of income over the years as
shown below:
($ IN MILLIONS)
2011
2010
2009
2008
2007
2006 and prior
Total Income
219.6
250.3
(221.5)
12.4
149.2
591.2
1,001.2
3
Funds from Operations Adjusted for Comparability was $5.27 per share in both 2011 and 2010. The details of the
pluses and minuses are below:
($ IN MILLIONS, EXCEPT SHARE DATA)
Operations:
Same Store Operations (Washington Office .02 per share, Retail .06 per share)
Acquisitions, net of 17.6 of interest expense
Toys “R” Us
Hotel Pennsylvania
LNR
Vornado Capital Partners
Investment Income
Interest Expense
Other, primarily lease cancellations and development fees last year
Noncontrolling Interests
Dilution from Increased Share Count
Comparable FFO
Amount
Per Share
15.5
9.2
(28.1)
6.3
30.5
8.4
(19.7)
(4.5)
(11.5)
4.2
--
10.3
0.08
0.05
(0.14)
0.03
0.15
0.05
(0.10)
(0.02)
(0.07)
0.02
(0.05)
--
Growth
As is our custom, we present the chart below that traces our ten-year record of growth, both in absolute dollars and
per share amounts:
($ AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
Adjusted for Comparability
FFO
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
EBITDA
2,054,056
1,982,589
1,896,681
1,909,944
1,835,655
1,495,442
1,131,292
1,008,708
867,863
851,011
710,524
Amount
1,011,411
1,001,173
826,765
800,698
794,016
637,936
587,020
549,185
443,383
402,224
338,705
Per
Share
5.27
5.27
4.76
4.89
4.84
4.09
4.04
4.13
3.80
3.57
3.40
Shares
Outstanding
196,541
195,746
194,082
168,903
167,672
166,513
156,487
145,407
137,754
129,586
104,858
FFO has grown at 11.6% over ten years (4.5% on a per share basis) and 9.7% over five years (5.2% on a per share
basis).
4
Share Performance
Here is a chart showing Vornado’s total return as compared to the RMS Index* for various periods ending
December 31, 2011 and for 2012 year-to-date:
2012 YTD
One-year
Three-year
Five-year
Ten-year
Fifteen-year
Twenty-year
Vornado
10.5%
(4.6%)
40.2%
(25.2%)
187.0%
494.1%
2,191.0%
RMS
Index
10.7%
8.7%
79.6%
(7.3%)
163.2%
254.2%
NA
*RMS is the Morgan Stanley REIT Index, which was first published fifteen years ago.
We believe our shares trade at a discount to spot NAV. As troubling, some analysts believe our NAV has recently
been growing more slowly than some of our peer’s – undoubtedly a capital allocation/mix of assets issue.
As Mike1 recently said to an industry group, “We have lost some luster and we are going to fight to get it back.”
And we will.
Shareholders and analysts have not been bashful in offering suggestions. Many believe that the value of our great
assets/business(es) is masked by…this, that and the other. Everyone suggests conference calls – fair enough. Other
suggestions have been: we are too big, nothing moves the needle – buy back shares; we are too complicated –
simplify, sell non-core, Mart, even Retail. Some say, split-up the Company into smaller, pure play(s).
Everything is on the table.
We Will….
We will…conduct quarterly conference calls beginning with this year’s second quarter. In addition, Joe (Joe
Macnow, CFO), Ross (Ross Morrison, SVP - Controller) and Cathy (Cathy Creswell, VP - Investor Relations) will,
as usual, be available following each quarterly release for one-on-ones with shareholders and analysts.
We will…continue to sell down the Mart business asset by asset2, retaining for now the 3.5 million square foot
Chicago Merchandise Mart. These assets are currently being marketed. In 2011, we “sold” High Point to the lender
for $237 million, realizing an $84 million gain. In January 2012, we sold the 350 West Mart building for $228
million, realizing a $54 million gain. We entered this business in 1998 with the $630 million acquisition of the
Merchandise Mart and related assets. Over the years, we grew the business with 11 bolt-on acquisitions of buildings
and trade shows investing an additional $338 million. This business was a grower for us until it fell victim to the
housing recession/depression. Valuing the entire business today at what we believe to be building-by-building
market pricing, we would have earned a 10% IRR. Thanks to Chris Kennedy, who ran this business until July 2011.
And thanks to Mark Falanga and Myron Maurer who run this business now.
1 Michael D. Fascitelli, Vornado’s President and, since May 2009, CEO and my partner for the last 15 years in
running Vornado.
2 We did try to sell this business as a single division; we came close with one buyer, but no cigar.
5
We will… reduce our exposure to the enclosed mall business.3 We certainly have the expertise to lease, manage and
develop mall product, but with only a handful of malls we are in no-man’s land.
We will… trim non-strategic, non-geographic assets from our strip shopping center portfolio to recycle capital.
We will…explore alternatives for the remaining strip assets.
We will…redefine our New York business segment, run by the very capable David Greenbaum, to encompass all of
our Manhattan assets by including the 1.0 million square feet in 21 freestanding Manhattan street retail assets
(currently in the Retail segment)4, and Hotel Pennsylvania and Alexander’s (currently in the Other segment).
We will…continue to harvest, divest, and sell all non-core assets (Toys “R” Us included). Some are liquid and more
easily sold and a few are illiquid and difficult to sell. We will work all this through.
We will hold for now the non-core 23.4 million shares of JC Penney to reap the benefit of the Company’s
transformation5 under CEO Ron Johnson (creator of the Apple retail business) and President Michael Francis.
3 We will of course continue to re-develop Springfield Mall, Springfield, VA (under the leadership of
Bob Minutoli), where a large and affluent population and under-malled trade area, make it one of the best mall
development opportunities in the country.
4 As we were discussing uniting for accounting segment reporting our 1 million square feet of freestanding
Manhattan retail (now in the Retail segment) with their retail brethren in the base of our office buildings,
(already in the New York Office segment) Joe opined that this 2.2 million square foot, 46-property,
$211 million EBITDA unique business, undoubtedly the lowest cap rate business there is, should be its own
freestanding public company. Interesting idea, but probably won’t happen.
5 On January 25, 2012, Ron and Michael outlined their plans for JC Penney in an Apple-style launch event which
can be seen at www.jcpenney.com.
6
BRAC
We disclose in our 2011 Form 10-K, page 76, that the effect of BRAC (the Base Realignment and Closure statute
passed in 2005, which finally made landfall this year) on Crystal City and Skyline will cause our Washington
occupancy to decline to the low 80’s %; that 2012 EBITDA will be lower than 2011 by approximately $55-65
million; and, that it will take approximately two to three years to fully absorb this vacancy and for EBITDA to fully
recover. We’ve handled large move-outs before when in 2004-2005 the Patent and Trademark Office relocated
2 million square feet from Crystal City. Re-leasing then took two to three years. We benefitted then and we will
benefit now by attracting many new private sector tenants to Crystal City to join our cohort of GSA tenants. Of
course, all this is a financial negative, which I guesstimate may cost us as much as $1.50 per share. Here’s how I do
the math: lost cash flow of, say, $60 million this year, somewhat less next year and less again the following year,
plus the present value of accelerated TI’s and leasing commissions. Damn annoying, but livable.
Skyline is an eight-building, 2.6 million square foot complex on Leesburg Pike, 3.5 miles from the Pentagon.
BRAC will inflict more than 30% vacancies here – the eye of our BRAC storm. These assets are subject to a
non-recourse $678 million ($257 per square foot) 5.74% cross collateralized financing due in 2017. We need relief
here, and accordingly have requested the loan be placed in special servicing.
There is a silver lining. BRAC emptied 1851 South Bell Street, a 370,000 square foot Crystal City office building.
Recently, we formally submitted our 4.1 Site Plan Approval to raze this building and replace it with a 700,000
square foot new-build state-of-the-art office building to be re-addressed 1900 Crystal Drive. This is the maiden
project (the first of many such projects, over time) under the 2010 Crystal City Sector Plan, which entitles us to
increase our 8.3 million square feet in Crystal City to 12.4 million square feet.
Our 26-building Crystal City complex, on the shore of the Potomac, contiguous to Washington’s Reagan National
Airport, a five-iron from the Pentagon, is the flagship of our Washington business. With little fanfare, new rents at
Crystal City have risen from $31.36 in 2005 to $41.81 in 2011. Our Crystal City complex is really a city within a
city, allowing us over the ten years of our ownership to create a unique amenity-rich environment, constantly
improving, creating very significant shareholder value. I am confident the next ten years will be even better.
7
Acquisitions/Dispositions/Fund
Our external growth has never been programmed, formulaic or linear, i.e. we do not budget acquisition activity.
Each year, we mine our deal flow for opportunities and, as such, our acquisition volume is lumpy. Here is a ten-year
schedule of acquisitions and dispositions:
Acquisitions6
Dispositions
($ IN THOUSANDS)
2012 to date
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
Number of
Transactions
--
12
15
--
3
38
32
31
17
9
6
163
Asset
Cost
--
1,499,100
542,400
--
31,500
4,063,600
2,177,000
4,686,000
511,800
533,000
1,835,400
15,879,800
Number of
Transactions
6
7
5
16
6
5
3
--
1
3
--
52
Proceeds
305,065
389,212
137,792
262,838
493,172
186,259
105,187
--
12,900
299,852
--
2,192,277
Profit
54,844
137,846
56,830
42,987
171,110
60,126
31,662
--
9,850
161,022
--
726,277
2011 was a very good year for acquisitions (outlined below). Kudos to Michael Franco and Wendy Silverstein,
Co-heads of Acquisitions, and team for outstanding performance.
($ IN THOUSANDS)
280 Park Avenue (49.5% interest)
666 Fifth Avenue (49.5% interest)
One Park Avenue (30.3% interest)7
1399 New York Avenue (97.5% interest)
Other
Three Mezzanine loans
Vornado Capital Partners8 (25% interest)
NY
NY
NY
DC
NY
Asset
Cost
496,000
543,000
123,300
107,500
13,100
95,200
Square Feet
Our Ownership
609,000
718,000
282,000
130,000
145,400
--
121,000
1,499,100
173,600
2,058,000
Total
1,218,000
1,437,000
932,000
130,000
276,200
--
3,993,200
1,163,400
In 2011, the Fund invested $484 million ($121 million our share) in three deals - One Park Avenue, Crowne Plaza
Times Square and 11 East 68th Street. For further information, see page 5 of our 2011 Form 10-K.
In the period 2011 to date, we disposed of $694 million of assets, principally, $465 million of Mart Division assets,
two District of Columbia mid-block office buildings for $107 million which was recycled into the Class A 1399
New York Avenue District of Columbia office building, and $122 million of other transactions. EVP Mike
DeMarco is taking the lead on dispositions. Our disposition activity will increase in the next several years.
6
7
Excludes marketable securities.
This interest is a Vornado co-investment and is in addition to our investment through the Fund. In summary,
Vornado’s ownership of One Park Avenue is 46.5% at a cost of $190 million for our 433,000 square foot share.
8 We are the general partner, a 25% limited partner and the investment manager of Vornado Capital Partners (the
“Fund”), an $800 million real estate fund. It is our exclusive investment vehicle during its three-year
investment period ending July 2013, excluding carve-outs for land and ground-up development; investments
using our securities; investments related to our current properties; and noncontrolling interests in equity and
debt securities.
8
Lease, Lease, Lease
The mission of our business is to create value for shareholders by growing our asset base through the addition of
carefully selected properties and by adding value through intensive and efficient management. As in past years, we
present leasing and occupancy statistics for our businesses.
(SQUARE FEET IN THOUSANDS)
Total
New York
Washington
Retail
Office
Showroom
Office
Merchandise Mart
6,255
4,950
6,702
Year Ended
2011
Square feet leased
Mark-to-Market*
Occupancy rate
Number of transactions
Year Ended
2010
Square feet leased
Mark-to-Market*
Occupancy rate
Number of transactions
2009
Square feet leased
Mark-to-Market*
Occupancy rate
Number of transactions
________________________________
* GAAP Basis
2,432
18.4%
95.6%
149
1,277
(1.9%)
95.6%
154
1,448
4.7%
95.5%
158
1,606
8.3%
90.0%
215
1,522
16.5 %
93.0 %
205
1,697
10.0%
94.3%
234
3,158
18.9%
93.3%
281
1,209
13.4 %
92.3 %
182
1,139
16.4 %
91.6 %
127
257
14.7%
90.5%
8
171
(6.1%)
91.8%
15
203
18.0%
88.8%
4
438
2.6%
83.0%
158
596
4.0%
93.8%
238
754
8.2%
89.4%
264
9
Capital Markets
Since January 1, 2011, we have executed the following financial transactions:
• Fourteen financings secured by real estate aggregating $2.897 billion at a weighted average interest rate of
4.42% and a weighted average term of 7.3 years. Five of these financings were to support newly acquired
assets; the other nine yielded $368 million of net proceeds.
•
In November 2011, we issued $400 million ten-year 5.057% senior unsecured notes to pre-fund the pay-off
of $499 million of 3.875% (5.32% GAAP) Exchangeable Senior Debentures which we have called and will
retire on April 18, 2012.
• We renewed both of our unsecured revolving credit facilities aggregating $2.5 billion. The first facility,
which was renewed in June 2011, bears interest at LIBOR plus 1.35% and has a 0.30% facility fee (drawn
or undrawn). The second facility, which was renewed in November 2011, bears interest at LIBOR plus
1.25% and has a 0.25% facility (drawn or undrawn). The LIBOR spread and facility fee on both facilities
are based on our credit ratings. Both facilities mature in four years and have one-year extension options.
• We repaid the $43 million loan secured by the Washington Design Center and $282 million of unsecured
debt.
•
In April 2011 we sold 9,850,000 6.875% Series J Cumulative Redeemable Preferred Shares at a price of
$25.00 per share for $239 million of net proceeds.
At year-end we had $3.155 billion of liquidity, comprised of $793 million of cash, restricted cash and marketable
securities9 and $2.362 billion undrawn under our $2.5 billion revolving credit facilities. Our liquidity today,
adjusting for the retirement of the $499 million of Exchangeable Senior Debentures, is $2.8 billion.
Debt is now 39.4% of our market-value balance sheet. Since stock prices fluctuate, we believe an even better
measure of leverage may be debt to EBITDA – ours is currently 6.7x, down from 7.6x a couple of years ago.
Vornado remains committed to maintaining our investment grade rating.
Our Capital Markets “A team” is headed by EVPs Michael Franco and Wendy Silverstein with
SVPs Dan Guglielmone and Richard Reczka.
9
Excluding our $684 million investment in JC Penney.
10
Sustainability
At Vornado, we believe that environmental sustainability is not only responsible citizenry, it is also good business.
Our goal is to be a leader in sustainability by creating a corporate culture that integrates the principles of
environmental responsibility and sustainable growth into our business practices. Please see highlights of the
sustainability section of our website reprinted on pages 14-18 of this annual report.
Top Ten
Here’s a top ten list of little known, interesting Vornado factoids:
• Our 6.3 million square feet of leasing activity in 2011 in 735 transactions was our second best leasing year
ever. Thank you to our all-star leasing captains: Glen Weiss, Brendan Owen, Jim Creedon, Sherri White,
Leigh Lyons, Michael Zucker and Paul Heinen.
• Our largest Fifth Avenue retail lease expires in just two years. We expect to re-let this space for a four-
bagger. In the end, I expect this building to be worth more than six-fold what we paid for it in 1997.
• We own the only two Kmarts in Manhattan and three metropolitan New York area Sears stores, which are
among their ten best.
• We hear that the 1,000 foot tall, direct park-view apartment tower under construction on 57th Street is
pricing at $6,500 per square foot. Our 220 Central Park South site, just down the block, is better.
• Manhattan retail is on fire. Sherri is busy.
• We have about $1 billion of non-earning assets, a trove of future value creation.
• We own 2,424 rental apartment units in Washington and land for 4,200 more. These apartments, which we
now manage internally, produced 33% same store growth in 2011 (11% from rate increase and 22% from
occupancy gain). In addition, we have 4.1 million square feet of development rights in Crystal City under
the Sector Plan and 2.9 million square feet of development rights in Rosslyn and Pentagon City.
•
1900 Crystal Drive, Mitchell’s to-be-built 700,000 square foot office building, is an architectural knock
out, will have a halo effect on all of Crystal City and will “tower” over the Crystal City skyline by 150 feet.
• Our 26% share of special servicer LNR’s 2011 earnings were $58 million ($31 million recurring,
$27 million one-timers) versus our investment of $131 million.
• Vornado won the NAREIT Leader in the Light Gold Award for the second year in a row, in recognition of
our industry-leading energy and sustainability programs.
11
We are in a recovery (but by no means recovered). The recovery is inevitable, if only for the reason that the
governments of the Free World will make it so. Consensus is that the recovery will be shallow and as such, I
believe it will be much longer in duration than the three to five to seven year economic cycles that we are used to.
All this will prove to be a very good environment for our business.
We seem to be in a new paradigm: businesses have record earnings and rock-solid balance sheets; governments,
however, are broke. Government deficits and debt levels are scary and getting worse. I guess this will be okay,
until it isn’t.
Markets fluctuate, but they always revert to the mean. Ours is a capital intensive business; money is our largest raw
material and the cost of money is our largest expense. Interest rates will re-normalize, we just don’t know exactly
when (the Fed assures us not until after 2014). Market participants are acting as if today’s cheap debt will last
forever – it won’t.
I must say, I find investing in this market difficult. Nobody expected building prices to bounce back as strongly or as
quickly as they did – but they did. Assets are not cheap, either historically or in relation to current rents. Cap rates
are now 5% or lower for buildings in New York and Washington. Having said all that, capital wants to invest in our
home markets of New York and Washington more than anywhere in the United States – and that’s a good thing.
And assets like ours have a long history of doubling in value every ten years – also a good thing.
12
Our Vornado family has grown with 30 marriages and 51 babies this year.
Congratulations to David and Laureine on the birth of their first grandson, River Knight.
Congratulations to Michael and Jill on Kathy’s bat mitzvah; to Mike and Kelly on Allie’s sweet sixteen. Shannon
and Elliot had a boy, Ryan Sully.
Nick is going to Brown and Matt is going to Tulane. Sam is graduating and Mollie is going to Vassar.
Zach is going to Dartmouth and Rachel is going to Michigan. And, Blake is going to Michigan too.
Condolences to Bobby and to Mark.
Thanks to Ron Targan for his 12 years of service on the Audit Committee, and thanks to Bob Kogod for stepping in.
We welcome Daniel R. Tisch, who joined our Board in January. Dan is a seasoned, experienced investor, steeped in
the fabric, nuance and culture of business and of New York. And, like all New Yorkers, he loves real estate. Dan
joins a Board whose guidance and counsel is invaluable to our Company.
Mike and I are fortunate to work every day with the gold medal team. Our operating platforms are the best in the
business. We admire and appreciate the talents and energy of our partners, Mark Falanga, Michael Franco, David
Greenbaum, Joe Macnow, Mitchell Schear and Wendy Silverstein and Sherri White, Bob Minutoli, Mike DeMarco
and Mel Blum. Thank you as well to our very talented and hard working 39 Senior Vice-Presidents and 81 Vice-
Presidents who make the trains run on time, every day.
On behalf of Vornado’s senior management and 4,810 associates, we thank our shareholders, analysts and other
stakeholders for their continued support.
Steven Roth
Chairman
April 6, 2012
Again this year, I offer to assist shareholders with tickets to my wife’s theatrical productions on Broadway – Leap of
Faith, Clybourne Park and coming soon, Kinky Boots. Please call if I can be of help.
13
Sustainability at Vornado Realty Trust
At Vornado, we believe that environmental sustainability is not only responsible citizenry, it is also good business.
Our goal is to further our leadership in sustainability through continued focus on energy efficiency, environmental
stewardship, resource reduction and ongoing improvements to our buildings’ infrastructure, operations and tenant
engagement.
Since 2008, we have successfully integrated sustainability into our core operating practices by organizing teams
within each division and within each building who identify and implement cost-effective opportunities to reduce our
carbon footprint.
In 2011, our efforts were recognized through the following awards and recognitions:
• Over 22 million square feet (SF) of EPA-designated ENERGY STAR buildings
• Over 19 million SF of LEED EB (Existing Buildings)
• Nearly 2 million SF of LEED NC or CS (New Construction or Core & Shell)
• Over 2.5 million SF of LEED CI (Commercial Interiors) tenant spaces
• NAREIT Leader in the Light Gold Award (highest level award, second year running)
• Ranked Top 5 by the Global Real Estate Sustainability Benchmark (GRESB) among U.S. REITs
• BOMA New York Pinnacle Earth Award (One Penn Plaza)
Policy
Vornado’s corporate policy/commitment to sustainable practices in several key areas is summarized below.
Development
In all new development and redevelopment projects, Vornado strives to achieve LEED NC/CS Gold certification or
better.
Existing Buildings
A successful sustainability program in an existing building is a synergy of its infrastructure, operations and tenant
engagement. Using this three-pronged focus, Vornado works to improve efficiencies and establish environmentally
friendly best practices at each property. Our operations teams establish and implement best practices in energy
efficiency, resource conservation, ecologically sensitive products, and other sustainable practices in all possible
locations. Capital upgrades and renovations incorporate sustainable materials, equipment, and technologies
wherever feasible and practicable. Qualified existing buildings are certified under the LEED EB rating system.
Culture/Office Management
Vornado encourages a sustainability-minded culture in every division and at every level, with focus on the following
categories:
• Employee training and education
•
Indoor air quality monitoring and remediation
• Resource conservation (water, energy, materials)
• Responsible procurement (ecologically sensitive materials/vendors)
• Transportation (mass transit and alternative commuting, electric vehicle (EV) charging stations)
• Waste reduction (recycling)
14
Strategic Application of Sustainable Practices
With nearly 100 million SF of space nationwide, Vornado can leverage the scale and diversity of our portfolio, as
well as the depth and breadth of our operational expertise across all divisions. We test promising sustainable
technologies at selected sites, and roll them out at additional properties based on their success. Using this approach,
Vornado benefits from innovative products, services, and ideas that offer the broadest possible value to our
Company, our customers, our industry, our communities, and the environment.
Relationships
Vornado integrates sustainable practices and thinking into our relationships with tenants, contractors and
consultants. We incorporate sustainable standards into our contractual documents and agreements wherever
possible. We remain actively involved with local and national lawmakers to help influence the shaping of
sustainability policy in real estate.
Energy Efficiency and Management
In 2011, Vornado established a dedicated Energy Efficiency Capex fund to invest in building retrofits to improve the
operating efficiency of our building stock. We identified energy saving opportunities across our portfolios based on
data collected from completed audits and retro-commissioning reports as well as our engineering teams. Our
projects call for investment which qualifies for available rebates and incentives, while offering short term paybacks
and significant reductions in energy consumption. These projects will be measured and verified using our
proprietary advanced metering and energy management software systems to calculate payback and justify future
investment.
Energy efficiency starts at home, and Vornado is pleased to announce that we recently completed a LED lighting
retrofit in our corporate headquarters at 888 Seventh Avenue that resulted in a 30% decrease in our baseline energy
consumption. We are working to replicate this program in common areas at other properties. Vornado also engaged
site-level employees in energy efficiency by challenging them to accomplish a 10% year-over-year reduction in
energy consumption. Four of our largest assets in New York were able to exceed this goal, reducing thousands of
tons of carbon emissions and saving over $500,000 annually. Also of note in 2011, Vornado Retail successfully
implemented several parking lot lighting retrofit projects across our retail portfolio.
In general, our managers and engineers continue to utilize sophisticated building management systems and
technology to manage and mitigate energy consumption throughout our portfolio. Many Vornado properties also
participate in demand response programs. In 2011, Vornado properties helped to curtail over 12 MW of power
during peak demand periods when the electricity grid was strained. While we continue to enhance our energy
management capabilities through new metering and technology, our Tenant Service Center and Energy Information
Portal™ are industry-leading amenities, demonstrating our commitment to energy efficiency and reduction.
Tenant Service Center
Vornado developed and operates the Tenant Service Center (TSC) - one of the largest and most sophisticated energy
management and building systems control centers in the United States - designed to commission, monitor and
regulate power consumption in over 20.5 million SF of Vornado owned and managed properties in the Washington,
DC area. At the TSC, over 80 buildings are remotely monitored and controlled around the clock by licensed
engineers who track building performance by monitoring different sensors in every building.
Energy Information Portal
In a typical Vornado building, the tenants account for up to 70% of energy consumption. Educating the tenant base
is the key to long lasting success in our sustainability efforts. In 2009, Vornado launched the trademarked Energy
Information Portal (EIP™) as a tool to provide tenants with real-time monitoring of their energy consumption.
Collecting pulse output readings from its 3,000 submeters across the portfolio, the EIP displays consumption to
tenants and building operators in graph and table format, enabling them to see the success of their energy reduction
activity – and the associated cost savings – on a real-time basis.
15
Onsite Generation and EV Stations
Cogeneration (also known as combined heat and power, CHP) is the use of a heat engine or a power station to
simultaneously generate both electricity and useful heat. It is one of the most common forms of energy recycling.
The advantages of on-site cogeneration in the commercial office setting are compelling: including the delivery of
power with increased efficiency and a lower carbon footprint, and the ability to provide back-up power to tenants
while relieving utility grid constraints.
Our 6.2 MW project at One Penn Plaza in New York commenced operation in 2010. It provides up to 60% of the
building’s electricity and offsets up to 30% of the building’s steam requirement, making it one of the largest existing
Cogen projects to be integrated into an existing New York City office building.
In 2011, Vornado Retail initiated commercial operation of our first solar project, a 900 kilowatt project at Bergen
Town Center in New Jersey. Today, the solar panels generate enough electricity to supply common area needs at the
property – pulling the usage entirely “off the grid.”
Also in 2011, Vornado’s Washington DC Office division installed and commissioned ten electric vehicle charging
stations across the greater DC Metro area, including Arlington County, Fairfax County and downtown Washington,
DC. The introduction of electric vehicle charging stations help to support the emerging EV market in the region. For
2012, we have leased 2 electric Chevy Volts for use by our employees (particularly our leasing team) to help reduce
our carbon footprint and lower our transportation costs.
Vornado continues to investigate further opportunities to implement on-site generation and charging stations across
our portfolio.
Green Cleaning
Maintaining a clean building environment is critical to employee health and the environment. “Green” cleaning
standards combine cleaning best practices with the use of low environmental impact products to ensure a high
degree of sustainability. Building Maintenance Services (BMS) LLC, cleans and maintains our buildings using a
LEED-Standard green cleaning program, with a focus on:
• Employee training and education
• Energy conservation
•
Indoor air quality
• Resource conservation
• Responsible procurement and low environmental-impact product lines
• Waste reduction
• Water conservation
Recycling & Reclamation
Recycling and reclamation programs are essential to providing a sustainably built environment. By preventing the
waste of potentially useful materials and reducing the consumption of fresh raw materials, recycling and reclamation
projects help to reduce systemic energy usage and reduce the need for conventional waste disposal.
Vornado is committed to supporting the recycling of materials and diversion of waste away from landfills, wherever
possible. This includes everyday waste produced in a building (trash, paper waste, food waste) as well as
construction waste and debris. Our goal is to maximize and optimize our diversion ratio of waste, and ensure that
such materials can be diverted away from landfill to separation and recycling facilities.
In the fourth quarter of 2011, Vornado commenced capital improvements in New York at 11 Penn Plaza and 595
Madison Avenue, two 1920s vintage buildings with original period details and ornamentation. Vornado’s operations
team was able to reclaim pieces of rare Botticino marble from old corridors in each building to construct new
security desks in the building lobbies. The projects successfully yielded cost savings and reduced carbon footprints,
while delivering a finished product that seamlessly matches the existing design.
16
LEED
Developed by the U.S. Green Building Council (USGBC), the LEED (Leadership in Energy and Environmental
Design) rating system provides building owners and operators a concise framework for identifying and
implementing practical and measurable green building design, construction, operations and maintenance solutions.
Vornado’s commitment to LEED encompasses the full range of programs, space and construction types: from LEED
NC (New Construction), to LEED EB (Existing Buildings), to LEED CI (Commercial Interiors).
Since our first LEED-EB Certification with the Merchandise Mart in Chicago (Silver, 2007), Vornado’s LEED
pursuits have evolved to encompass over 19 million SF of LEED EB certified office buildings in our portfolio,
nearly 2 million SF of LEED NC/CS and nearly 2.5 million SF of LEED CI certified tenant spaces.
2011 highlights include:
Vornado became the first REIT to register for the USGBC’s LEED EB Volume Program. Through this program,
Vornado’s Washington DC Office division is positioned to certify an additional 25 buildings in 2012. Through these
and other certifications in 2012, we anticipate our total LEED square footage to increase to over 27 million SF by
the end of 2012.
Vornado is the only REIT currently involved in the USGBC’s LEED Portfolio Pilot Program.
To learn more about LEED, visit www.usgbc.org
Education and Outreach
Understanding sustainability, efficiency and environmental stewardship is a key part of maintaining a high
performance building. At Vornado, we offer regular educational sessions for our property managers and engineers to
help them stay up to date on the latest sustainability and LEED principles.
Engaging our tenants in our sustainability effort has also been a critical component in making our programs
effective. Tenant outreach/engagement is recognized by the USGBC as an essential component of LEED
Certification. Our award winning communications program (including our website, quarterly newsletters, and email
announcements) has helped make tenants aware of our progress, engaged tenant activity, and resulted in LEED
innovation points towards property certification. Most importantly our outreach has helped to build strong landlord-
tenant energy reduction partnerships, and our sustainability support has led to over 2.5 million SF of LEED CI space
throughout our portfolio.
Arlington Green Games
In 2011, Vornado’s Washington, DC Office division enrolled 20 buildings in the Arlington Green Games, a year-
long competition developed by Arlington County focused on reducing energy, waste and water usage in commercial
office buildings. By recruiting over 50 businesses, agencies and organizations in our portfolio to participate in the
Green Games, Vornado not only demonstrated our commitment to operate our buildings in a sustainable manner and
to support our tenants in their sustainability initiatives, but we were the most successful participant, winning twenty
awards.
17
Strategic Partnerships and Corporate Involvement
Our sustainability team is actively involved in the following pilot programs and industry groups to help guide and
develop new guidelines related to energy and sustainability issues.
• Portfolio Pilot Program and LEED EB Volume program with the U.S. Green Buildings Council (USGBC)
• Demonstration Project with Natural Resources Defense Council (NRDC) and Clinton Climate Initiative
•
• The Real Estate Roundtable Sustainability Policy Action Committee (SPAC)
• Mayor’s Office of Long Term Planning (NYC) Advisory Committee and REBNY Sustainability
Integrated Energy Management Plan (IEMP) in Crystal City with Arlington County and Washington Gas
Committee
• Arlington County Community Energy and Sustainability Task Force
• Founding group of the USGBC/ICSC/RILA Retail Sustainability Committee
• General Services Administration (GSA) Green Building Advisory Committee, which was created as a
result of the Energy Independence and Security Act (EISA)
ENERGY STAR Partner
As an ENERGY STAR Corporate Partner, Vornado is committed not only to optimizing our energy efficiency and
energy management efforts, but to using our business platforms to help educate our tenants, clients and customers
about ENERGY STAR programs.
Benchmarking energy usage is the keystone to any effective energy efficiency and management program, and
Vornado utilizes the ENERGY STAR Portfolio Manager Program to benchmark and monitor the efficiency of our
buildings. ENERGY STAR is a joint program of the U.S. EPA and the U.S. Department of Energy focused on
promoting energy efficiency. For commercial buildings, the ENERGY STAR program scores the energy
performance of buildings on a 1-100 scale. Facilities that achieve a score of 75 or higher are eligible for the
ENERGY STAR award, indicating that they are among the top 25% of facilities in the country for energy
performance. We are proud that over 22 million SF of buildings in our office portfolio scored higher than 75 and
have achieved the prestigious ENERGY STAR label, and benchmark our progress year-over-year to add to our
growing list of ENERGY STAR labeled properties.
We are using our sustainability initiatives, at our office buildings and retail properties, to convey information about
ENERGY STAR programs and energy reduction measures, and to help consumers and tenants better understand
what they can do to reduce their energy consumption.
2012 Goals
•
Implement and track energy efficiency upgrades to enable corporate reporting and metrics on portfolio-
wide energy, water and waste reduction
• Certify 8-10 million SF of additional buildings in the next two years
• Focus on partnerships that have a strategic regional or corporate benefit
• Meet or exceed evolving regulatory standards locally and nationally
18
APPENDIX 1 – DETAIL OF OTHER EBITDA – See Page 2
($ IN THOUSANDS)
555 California Street
Corporate general and administrative expenses
Investment Income
Interest income on mortgages receivable
Lexington Realty Trust
Other investments
Non-cash write-downs:
Partially owned entities
Wholly owned entities
Mezzanine loans loss reversal and net gain on disposition
Net gain on early extinguishment of debt
Net gain from Suffolk Downs sale of partial interest
Recognition of disputed receivable from Stop & Shop
Derivative positions in marketable securities
Discontinued operations – EBITDA of properties sold
Other, net
Total
2011
44,724
(85,922)
27,464
14,023
31,900
36,610
(13,794)
(28,799)
82,744
83,907
12,525
23,521
12,984
25,994
348
268,229
2010
45,392
(90,343)
26,617
10,319
41,000
55,924
(11,481)
(127,513)
53,100
92,150
--
--
130,153
56,878
1,651
283,847
19
Below is a reconciliation of Net Income to EBITDA:
($ IN MILLIONS)
Net Income
Interest and debt expense
Depreciation, amortization,
and income taxes
Cumulative effect of change
in accounting principle
Gains on sale of real estate
Noncontrolling Interests
EBITDA before noncontrolling
interests and gains on sale of
real estate
2011
662.3
797.9
2010
647.9
828.1
2009
106.2
826.8
2008
2007
359.3
821.9
541.5
853.5
2006
554.8
698.4
2005
536.9
418.9
2004
592.9
313.3
2003
2002
460.7
296.1
232.9
305.9
2001
263.7
266.8
782.2
706.4
739.0
568.1
680.9
530.7
346.2
298.7
281.1
257.7
188.9
EBITDA
2,242.4
2,182.4
1,672.0
1,749.3
2,075.9
1,783.9
1,302.0
1,204.9
1,037.9
--
--
--
--
--
--
--
--
--
(51.6)
55.9
(57.2)
55.2
(45.3)
25.1
(57.5)
55.4
(65.0)
69.8
(32.6)
79.9
(31.6)
133.5
(75.8)
156.5
(161.8)
175.7
137.4
30.1
826.6
--
4.1
723.5
(15.5)
109.9
2,246.7
2,180.4
1,651.8
1,747.2
2,080.7
1,831.2
1,403.9
1,285.6
1,051.8
964.0
817.9
Non-comparable items
(192.6)
(197.8)
244.9
162.7
(245.0)
(335.8)
(272.6)
(276.9)
(183.9)
(113.0)
(107.4)
EBITDA adjusted for comparability
2,054.1
1,982.6
1,896.7
1,909.9
1,835.7
1,495.4
1,131.3
1,008.7
867.9
851.0
710.5
Below is a reconciliation of Net Income to FFO:
($ IN MILLIONS, EXCEPT SHARE AMOUNTS)
Net Income
Preferred share dividends
Net Income applicable to common shares
Depreciation and amortization of real property
Net gains on sale of real estate and insurance settlements
Cumulative effect of change in accounting principle
Partially-owned entity adjustments:
Depreciation and amortization of real property
Net gains on sale of real estate
Income tax effect of adjustments included above
Noncontrolling interests’ share of above adjustments
Interest on exchangeable senior debentures
Preferred share dividends
Funds From Operations
Funds From Operations per share
2008
359.3
(57.1)
302.2
509.4
(57.5)
--
115.9
(9.5)
(23.2)
(49.7)
25.3
0.2
813.1
$4.97
2007
541.5
(57.1)
484.4
451.3
(60.8)
--
134.0
(15.5)
(28.8)
(46.7)
25.0
0.3
943.2
$5.75
2006
554.8
(57.5)
497.3
337.7
(33.8)
--
105.6
(13.2)
(21.0)
(39.8)
24.7
0.7
858.2
$5.51
2005
536.9
(46.5)
490.4
276.9
(31.6)
--
42.1
(2.9)
(4.6)
(32.0)
18.0
0.9
757.2
$5.21
2004
592.9
(21.9)
571.0
228.3
(75.8)
--
49.4
(3.0)
--
(28.0)
--
8.1
750.0
$5.63
2003
2002
460.7
(20.8)
439.9
208.6
(161.8)
--
54.8
(6.8)
--
(20.1)
--
3.6
518.2
$4.44
232.9
(23.2)
209.7
195.8
--
30.1
51.9
(3.4)
--
(50.5)
--
6.2
439.8
$3.91
2001
263.7
(36.5)
227.2
119.6
(15.5)
4.1
65.6
(6.3)
--
(19.7)
--
19.5
394.5
$3.69
20
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
⌧
(cid:134)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FORM 10-K
For the Fiscal Year Ended: December 31, 2011
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number:
001-11954
VORNADO REALTY TRUST
(Exact name of Registrant as specified in its charter)
Maryland
(State or other jurisdiction of incorporation or organization)
22-1657560
(I.R.S. Employer Identification Number)
888 Seventh Avenue, New York, New York
(Address of Principal Executive Offices)
Registrant’s telephone number including area code:
(212) 894-7000
10019
(Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Shares of beneficial interest,
$.04 par value per share
Series A Convertible Preferred Shares
of beneficial interest, no par value
Cumulative Redeemable Preferred Shares of beneficial
interest, no par value:
8.5% Series B
8.5% Series C
7.0% Series E
6.75% Series F
6.625% Series G
6.75% Series H
6.625% Series I
6.875% Series J
Name of Each Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES ⌧ NO (cid:134)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES (cid:134) NO ⌧
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES ⌧ NO (cid:134)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ⌧ No (cid:134)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. (cid:134)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
⌧ Large Accelerated Filer
(cid:134) Non-Accelerated Filer (Do not check if smaller reporting company)
(cid:134) Accelerated Filer
(cid:134) Smaller Reporting Company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES (cid:134) NO ⌧
The aggregate market value of the voting and non-voting common shares held by non-affiliates of the registrant, i.e. by persons other
than officers and trustees of Vornado Realty Trust, was $15,602,381,000 at June 30, 2011.
As of December 31, 2011, there were 185,080,020 of the registrant’s common shares of beneficial interest outstanding.
Documents Incorporated by Reference
Part III: Portions of Proxy Statement for Annual Meeting of Shareholders to be held on May 24, 2012.
This Annual Report on Form 10-K omits financial statements required under Rule 3-09 of Regulation S-X, for Toys “R” Us,
Inc. An amendment to this Annual Report on Form 10-K will be filed as promptly as practicable following the availability of
such financial statements.
Item
Financial Information:
Page Number
INDEX
PART I.
PART II.
1.
1A.
1B.
2.
3.
4.
5.
6.
7.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and
Results of Operations
7A.
Quantitative and Qualitative Disclosures about Market Risk
8.
9.
9A.
9B.
10.
11.
12.
13.
14.
15.
PART III.
PART IV.
Signatures
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance(1)
Executive Compensation(1)
Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters(1)
Certain Relationships and Related Transactions, and Director Independence(1)
Principal Accounting Fees and Services(1)
Exhibits, Financial Statement Schedules
4
11
24
24
61
61
62
64
66
117
118
174
174
176
176
177
177
177
177
178
179
(1) These items are omitted in whole or in part because the registrant will file a definitive Proxy Statement pursuant to Regulation
14A under the Securities Exchange Act of 1934 with the Securities and Exchange Commission no later than 120 days after
December 31, 2011, portions of which are incorporated by reference herein.
2
FORWARD-LOOKING STATEMENTS
Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not
guarantees of performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions,
risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these
forward-looking statements. You can find many of these statements by looking for words such as “approximates,” “believes,”
“expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Annual Report on Form
10-K. We also note the following forward-looking statements: in the case of our development and redevelopment projects, the
estimated completion date, estimated project cost and cost to complete; and estimates of future capital expenditures, dividends to
common and preferred shareholders and operating partnership distributions. Many of the factors that will determine the outcome of
these and our other forward-looking statements are beyond our ability to control or predict. For further discussion of factors that could
materially affect the outcome of our forward-looking statements, see “Item 1A. Risk Factors” in this Annual Report on Form 10-K.
For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as
of the date of this Annual Report on Form 10-K or the date of any document incorporated by reference. All subsequent written and
oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the
cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to
our forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K.
3
ITEM 1.
BUSINESS
PART I
Vornado Realty Trust (“Vornado”) is a fully-integrated real estate investment trust (“REIT”) and conducts its business through,
and substantially all of its interests in properties are held by, Vornado Realty L.P., a Delaware limited partnership (the “Operating
Partnership”). Accordingly, Vornado’s cash flow and ability to pay dividends to its shareholders is dependent upon the cash flow of
the Operating Partnership and the ability of its direct and indirect subsidiaries to first satisfy their obligations to creditors. Vornado is
the sole general partner of, and owned approximately 93.5% of the common limited partnership interest in the Operating Partnership
at December 31, 2011. All references to “we,” “us,” “our,” the “Company” and “Vornado” refer to Vornado Realty Trust and its
consolidated subsidiaries, including the Operating Partnership.
As of December 31, 2011, we own all or portions of:
Office Properties:
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In Midtown Manhattan – 30 properties aggregating 20.8 million square feet;
In the Washington, DC / Northern Virginia area – 77 properties aggregating 20.5 million square feet, including 63 office
properties aggregating 17.5 million square feet and seven residential properties containing 2,424 units;
In San Francisco’s financial district – a 70% controlling interest in 555 California Street, a three-building office complex
aggregating 1.8 million square feet, known as the Bank of America Center;
Retail Properties:
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In Manhattan – 2.2 million square feet in 46 properties, of which 1.0 million square feet in 21 properties is in our Retail
Properties segment and 1.2 million square feet in 25 properties is in our New York Office Properties segment;
134 strip shopping centers, regional malls, and single tenant retail assets aggregating 24.2 million square feet, primarily in the
northeast states, California and Puerto Rico;
Merchandise Mart Properties:
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5.7 million square feet of showroom and office space, including the 3.5 million square foot Merchandise Mart in Chicago;
Other Real Estate and Related Investments:
• A 32.4% interest in Alexander’s, Inc. (NYSE: ALX), which owns seven properties in the greater New York metropolitan
area, including 731 Lexington Avenue, the 1.3 million square foot Bloomberg headquarters building;
• A 25.0% interest in Vornado Capital Partners, our $800 million real estate fund. We are the general partner and investment
manager of the fund;
• The 1,700 room Hotel Pennsylvania in Midtown Manhattan;
• A 32.7% interest in Toys “R” Us, Inc.;
• An 11.0% interest in J.C. Penney Company, Inc. (NYSE: JCP); and
• Other real estate and related investments, marketable securities and mezzanine loans on real estate, including a 26.2% equity
interest in LNR Property Corporation, an industry leading mortgage servicer and special servicer.
4
OBJECTIVES AND STRATEGY
Our business objective is to maximize shareholder value. We intend to achieve this objective by continuing to pursue our
investment philosophy and executing our operating strategies through:
• Maintaining a superior team of operating and investment professionals and an entrepreneurial spirit;
•
Investing in properties in select markets, such as New York City and Washington, DC, where we believe there is a high
likelihood of capital appreciation;
Investing in retail properties in select under-stored locations such as the New York City metropolitan area;
• Acquiring quality properties at a discount to replacement cost and where there is a significant potential for higher rents;
•
• Developing and redeveloping our existing properties to increase returns and maximize value; and
•
Investing in operating companies that have a significant real estate component.
We expect to finance our growth, acquisitions and investments using internally generated funds, proceeds from possible asset
sales and by accessing the public and private capital markets. We may also offer Vornado common or preferred shares or Operating
Partnership units in exchange for property and may repurchase or otherwise reacquire these securities in the future.
VORNADO CAPITAL PARTNERS REAL ESTATE FUND (THE “FUND”)
In February 2011, the Fund’s subscription period closed with an aggregate of $800,000,000 of capital commitments, of which we
committed $200,000,000. We are the general partner and investment manager of the Fund, which has an eight-year term and a three-
year investment period. During the investment period, which concludes in July 2013, the Fund is our exclusive investment vehicle for
all investments that fit within its investment parameters, including debt, equity and other interests in real estate, and excluding (i)
investments in vacant land and ground-up development; (ii) investments acquired by merger or primarily for our securities or
properties; (iii) properties which can be combined with or relate to our existing properties; (iv) securities of commercial mortgage loan
servicers and investments derived from any such investments; (v) non-controlling interests in equity and debt securities; and (vi)
investments located outside of North America. The Fund is accounted for under the AICPA Investment Company Guide and its
investments are reported on its balance sheet at fair value, with changes in value each period recognized in earnings. We consolidate
the accounts of the Fund into our consolidated financial statements, retaining the fair value basis of accounting.
During 2011, the Fund made three investments (described below) aggregating $248,500,000 and exited two investments. As of
December 31, 2011, the Fund has five investments with an aggregate fair value of approximately $346,650,000, or $11,995,000 in
excess of cost, and has remaining unfunded commitments of $416,600,000, of which our share is $104,150,000.
One Park Avenue
On March 1, 2011, the Fund as a co-investor (64.7% interest), together with Vornado (30.3% interest), acquired a 95% interest in
One Park Avenue, a 932,000 square foot office building located between 32nd and 33rd Streets in New York, for $374,000,000. The
purchase price consisted of $137,000,000 in cash and 95% of a $250,000,000 five-year mortgage that bears interest at 5.0%.
Crowne Plaza Times Square
On December 16, 2011, the Fund formed a joint venture with the owner of the property to recapitalize the Crowne Plaza Hotel in
Times Square. The property is located at 48th Street and Broadway in Times Square and is comprised of a 795-key hotel, 14,000
square feet of prime retail space, 212,000 square feet of office space, nine large signage offerings, a 159-space parking garage and a
health club. The joint venture plans to reconfigure and reposition the retail and office space as well as add additional signage.
Vornado will manage and lease the commercial components of the property and the joint venture partner will asset manage the hotel.
This transaction was initiated by us in May 2011, when the Fund acquired a $34,000,000 mezzanine position in the junior most
tranche of the property’s mezzanine debt. In December 2011, the Fund contributed $31,000,000 and its partner contributed
$22,000,000 of new capital to pay down third party debt and for future capital expenditures. The new capital was contributed in the
form of debt that is convertible into preferred equity that receives a priority return and then will receive a profit participation. The
Fund has an economic interest of approximately 38% in the property. The Fund’s investment is subordinate to the property’s
$259,000,000 of senior debt which matures in December 2013, with a one-year extension option.
5
VORNADO CAPITAL PARTNERS REAL ESTATE FUND (THE “FUND”) - CONTINUED
11 East 68th Street
On December 29, 2011, the Fund committed to acquire the retail portion of 11 East 68th Street, an 11-story residential and retail
property located on Madison Avenue and 68th Street, for $50,500,000. The retail portion of the property consists of two retail units
aggregating 5,000 square feet. The Fund provided $21,200,000 at closing and will provide the remaining $29,300,000 over the next
two years. In addition, the Fund has also provided a $21,000,000 mezzanine loan on the residential portion of the property, which
bears paid-in-kind interest at 15%, matures in three years and has a one-year extension option.
ACQUISITIONS AND INVESTMENTS
1399 New York Avenue (the “Executive Tower”)
On December 23, 2011, we acquired the 97.5% interest that we did not already own in the Executive Tower, an 11-story, 128,000
square foot Class A office building located in the Washington, CBD East End submarket close to the White House, for $104,000,000
in cash.
666 Fifth Avenue Office
On December 16, 2011, we formed a joint venture with an affiliate of the Kushner Companies to recapitalize the office portion of
666 Fifth Avenue, a 39-story, 1.4 million square foot Class A office building in Manhattan, located on the full block front of Fifth
Avenue between 52nd and 53rd Street. We acquired a 49.5% interest in the property from the Kushner Companies, the current owner.
In connection therewith, the existing $1,215,000,000 mortgage loan was modified by LNR, the special servicer, into a $1,100,000,000
A-Note and a $115,000,000 B-Note and extended to February 2019; and a portion of the current pay interest was deferred to the B-
Note. We and the Kushner Companies have committed to lend the joint venture an aggregate of $110,000,000 (of which our share is
$80,000,000) for tenant improvements and working capital for the property, which is senior to the $115,000,000 B-Note. In addition,
we have provided the A-Note holders a limited recourse and cooperation guarantee of up to $75,000,000 if an event of default occurs
and is ongoing.
Independence Plaza
On June 17, 2011, a joint venture in which we are a 51% partner invested $55,000,000 in cash (of which we contributed
$35,000,000) to acquire a face amount of $150,000,000 of mezzanine loans and a $35,000,000 participation in a senior loan on
Independence Plaza, a residential complex comprised of three 39-story buildings in the Tribeca submarket of Manhattan.
280 Park Avenue Joint Venture
On March 16, 2011, we formed a 50/50 joint venture with SL Green Realty Corp to own the mezzanine debt of 280 Park Avenue,
a 1.2 million square foot office building located between 48th and 49th Streets in Manhattan (the “Property”). We contributed our
mezzanine loan with a face amount of $73,750,000 and they contributed their mezzanine loans with a face amount of $326,250,000 to
the joint venture. We equalized our interest in the joint venture by paying our partner $111,250,000 in cash and assuming
$15,000,000 of their debt. On May 17, 2011, as part of the recapitalization of the Property, the joint venture contributed its debt
position for 99% of the common equity of a new joint venture which owns the Property. The new joint venture’s investment is
subordinate to $710,000,000 of third party debt. The new joint venture expects to spend $150,000,000 for re-tenanting and
repositioning the Property.
6
DISPOSITIONS
On January 6, 2012, we completed the sale of 350 West Mart Center, a 1.2 million square foot office building located in Chicago,
Illinois, for $228,000,000 in cash, which resulted in a net gain of $54,200,000 that will be recognized in the first quarter of 2012.
On March 31, 2011, the receiver completed the disposition of the High Point Complex in North Carolina. In connection
therewith, the property and related debt were removed from our consolidated balance sheet and we recognized a net gain of
$83,907,000 on the extinguishment of debt.
On January 12, 2011, we sold 1140 Connecticut Avenue and 1227 25th Street in Washington, DC, for $127,000,000 in cash,
which resulted in a net gain of $45,862,000.
In 2011, we sold three retail properties in separate transactions for an aggregate of $40,990,000 in cash, which resulted in net
gains of $5,761,000.
FINANCING ACTIVITIES
Senior Unsecured Debt
On November 30, 2011, we completed a public offering of $400,000,000 aggregate principal amount of 5.0%, ten-year senior
unsecured notes and retained net proceeds of approximately $395,584,000. The notes were sold at 99.546% of their face amount to
yield 5.057%.
In 2011, we renewed both of our unsecured revolving credit facilities aggregating $2,500,000,000. The first facility, which was
renewed in June 2011, bears interest on drawn amounts at LIBOR plus 1.35% and has a 0.30% facility fee (drawn or undrawn). The
second facility, which was renewed in November 2011, bears interest on drawn amounts at LIBOR plus 1.25% and has a 0.25%
facility fee (drawn or undrawn). The LIBOR spread and facility fee on both facilities are based on our credit ratings. Both facilities
mature in four years and have one-year extension options. As of December 31, 2011, an aggregate of $138,000,000 was outstanding
under these facilities.
Secured Debt
On January 9, 2012, we completed a $300,000,000 refinancing of 350 Park Avenue, a 557,000 square foot Manhattan office
building. The five-year fixed rate loan bears interest at 3.75% and amortizes based on a 30-year schedule beginning in the third year.
The proceeds of the new loan and $132,000,000 of existing cash were used to repay the existing loan and closing costs.
On December 28, 2011, we completed a $330,000,000 refinancing of Eleven Penn Plaza, a 1.1 million square foot Manhattan
office building. The seven-year loan bears interest at LIBOR plus 2.35% and amortizes based on a 30-year schedule beginning in the
fourth year. We retained net proceeds of approximately $126,000,000 after repaying the existing loan and closing costs.
On September 1, 2011, we completed a $600,000,000 refinancing of 555 California Street, a three-building office complex
aggregating 1.8 million square feet in San Francisco’s financial district, known as the Bank of America Center, in which we own a
70% controlling interest. The 10-year fixed rate loan bears interest at 5.10% and amortizes based on a 30-year schedule beginning in
the fourth year. The proceeds of the new loan and $45,000,000 of existing cash were used to repay the existing loan and closing costs.
On May 11, 2011, we repaid the outstanding balance of the construction loan on West End 25, and closed on a $101,671,000
mortgage at a fixed rate of 4.88%. The loan has a 10-year term and amortizes based on a 30-year schedule beginning in the sixth year.
On February 11, 2011, we completed a $425,000,000 refinancing of Two Penn Plaza, a 1.6 million square foot Manhattan office
building. The seven-year loan bears interest at LIBOR plus 2.00%, which was swapped for the term of the loan to a fixed rate of
5.13%. The loan amortizes based on a 30-year schedule beginning in the fourth year. We retained net proceeds of approximately
$139,000,000 after repaying the existing loan and closing costs.
On February 10, 2011, we completed a $150,000,000 financing of 2121 Crystal Drive, a 506,000 square foot office building
located in Crystal City, Arlington, Virginia. The 12-year fixed rate loan bears interest at 5.51% and amortizes based on a 30-year
schedule beginning in the third year. This property was previously unencumbered.
7
FINANCING ACTIVITIES - CONTINUED
Secured Debt - continued
On January 18, 2011, we repaid the outstanding balance of the construction loan on 220 20th Street and closed on a $76,100,000
mortgage at a fixed rate of 4.61%. The loan has a seven-year term and amortizes based on a 30-year schedule.
On January 10, 2011, we completed a $75,000,000 financing of North Bergen (Tonnelle Avenue), a 410,000 square foot strip
shopping center. The seven-year fixed rate loan bears interest rate at 4.59% and amortizes based on a 25-year schedule beginning in
the sixth year. This property was previously unencumbered.
On January 6, 2011, we completed a $60,000,000 financing of land under a portion of the Borgata Hotel and Casino complex.
The 10-year fixed rate loan bears interest at 5.14% and amortizes based on a 30-year schedule beginning in the third year.
Preferred Equity
On April 20, 2011, we sold 7,000,000 6.875% Series J Cumulative Redeemable Preferred Shares at a price of $25.00 per share, in
an underwritten public offering pursuant to an effective registration statement. On April 21, 2011, the underwriters exercised their
option to purchase an additional 1,050,000 shares to cover over-allotments. On May 5, 2011 and August 5, 2011 we sold an
additional 800,000 and 1,000,000 shares, respectively, at a price of $25.00 per share. We retained aggregate net proceeds of
$238,842,000, after underwriters’ discounts and issuance costs and contributed the net proceeds to the Operating Partnership in
exchange for 9,850,000 Series J Preferred Units (with economic terms that mirror those of the Series J Preferred Shares).
8
DEVELOPMENT AND REDEVELOPMENT PROJECTS
We are evaluating various development and redevelopment opportunities which we estimate could require as much as $1.5 billion
to be expended over the next five years. These opportunities include:
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demolition of a 372,000 square foot office building in Crystal City, to construct a 700,000 square foot office building;
renovation of the Hotel Pennsylvania;
construction of a luxury residential condominium at 220 Central Park South, adjacent to Central Park;
re-tenanting and repositioning of 330 West 34th Street;
re-tenanting and repositioning of 280 Park Avenue;
complete renovation of the 1.4 million square foot Springfield Mall; and
re-tenanting and repositioning a number of our strip shopping centers.
We are also evaluating other development and redevelopment opportunities at certain of our properties in Manhattan, Rosslyn,
Pentagon City and Crystal City, for which plans, budgeted costs and financings have yet to be determined.
Cleveland Medical Mart Development Project
In 2010, two of our wholly owned subsidiaries entered into agreements with Cuyahoga County, Ohio (the “County”) to develop
and operate the Cleveland Medical Mart and Convention Center (the “Facility”), a 1,000,000 square foot showroom, trade show and
conference center in Cleveland’s central business district. The County is funding the development of the Facility, using the proceeds
it received from the issuance of general obligation bonds and other sources, up to the development budget of $465,000,000 and
maintain effective control of the property. During the 17-year development and operating period, our subsidiaries will receive net
settled payments of approximately $10,000,000 per year, which are net of its $36,000,000 annual obligation to the County. Our
subsidiaries’ obligation has been pledged by the County to the bondholders, but is payable by our subsidiaries only to the extent that
they first receive at least an equal payment from the County. Construction of the Facility is expected to be completed in 2013. As of
December 31, 2011, $145,824,000 of the $465,000,000 development budget was expended.
There can be no assurance that any of our development projects will commence, or if commenced, be completed on schedule or
within budget.
9
SEGMENT DATA
We operate in the following business segments: New York Office Properties, Washington, DC Office Properties, Retail Properties,
Merchandise Mart Properties and Toys “R” Us (“Toys”). Financial information related to these business segments for the years ended
December 31, 2011, 2010 and 2009 is set forth in Note 22 – Segment Information to our consolidated financial statements in this Annual
Report on Form 10-K. The Merchandise Mart Properties segment has trade show operations in Canada and Switzerland. The Toys segment
has 770 locations internationally.
SEASONALITY
Our revenues and expenses are subject to seasonality during the year which impacts quarterly net earnings, cash flows and funds from
operations, and therefore impacts comparisons of the current quarter to the previous quarter. The business of Toys is highly seasonal.
Historically, Toys’ fourth quarter net income, which we record on a one-quarter lag basis in our first quarter, accounts for more than 80% of
its fiscal year net income. The New York and Washington, DC Office Properties and Merchandise Mart Properties segments have historically
experienced higher utility costs in the first and third quarters of the year. The Merchandise Mart Properties segment has also experienced
higher earnings in the second and fourth quarters of the year due to major trade shows occurring in those quarters. The Retail Properties
segment revenue in the fourth quarter is typically higher due to the recognition of percentage and specialty rental income.
TENANTS ACCOUNTING FOR OVER 10% OF REVENUES
None of our tenants accounted for more than 10% of total revenues in any of the years ended December 31, 2011, 2010 and 2009.
CERTAIN ACTIVITIES
We do not base our acquisitions and investments on specific allocations by type of property. We have historically held our properties
for long-term investment; however, it is possible that properties in the portfolio may be sold as circumstances warrant. Further, we have not
adopted a policy that limits the amount or percentage of assets which could be invested in a specific property or property type. While we may
seek the vote of our shareholders in connection with any particular material transaction, generally our activities are reviewed and may be
modified from time to time by our Board of Trustees without the vote of shareholders.
EMPLOYEES
As of December 31, 2011, we have approximately 4,823 employees, of which 322 are corporate staff. The New York Office Properties
segment has 137 employees and an additional 2,816 employees of Building Maintenance Services LLC, a wholly owned subsidiary, which
provides cleaning, security and engineering services primarily to our New York Office and Washington, DC Office properties. The
Washington, DC Office Properties, Retail Properties and Merchandise Mart Properties segments have 457, 168 and 409 employees,
respectively, and the Hotel Pennsylvania has 514 employees. The foregoing does not include employees of partially owned entities, including
Toys or Alexander’s, of which we own 32.7% and 32.4%, respectively.
PRINCIPAL EXECUTIVE OFFICES
Our principal executive offices are located at 888 Seventh Avenue, New York, New York 10019; telephone (212) 894-7000.
MATERIALS AVAILABLE ON OUR WEBSITE
Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those
reports, as well as Reports on Forms 3, 4 and 5 regarding officers, trustees or 10% beneficial owners of us, filed or furnished pursuant to
Section 13(a), 15(d) or 16(a) of the Securities Exchange Act of 1934 are available free of charge through our website (www.vno.com) as soon
as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. Also available on
our website are copies of our Audit Committee Charter, Compensation Committee Charter, Corporate Governance and Nominating
Committee Charter, Code of Business Conduct and Ethics and Corporate Governance Guidelines. In the event of any changes to these
charters or the code or guidelines, changed copies will also be made available on our website. Copies of these documents are also available
directly from us free of charge. Our website also includes other financial information, including certain non-GAAP financial measures, none
of which is a part of this Annual Report on Form 10-K. Copies of our filings under the Securities Exchange Act of 1934 are also available
free of charge from us, upon request.
10
ITEM 1A. RISK FACTORS
Material factors that may adversely affect our business, operations and financial condition are summarized below. The risks and
uncertainties described herein may not be the only ones we face. Additional risks and uncertainties not presently known to us or that
we currently believe to be immaterial may also adversely affect our business. See “Forward-Looking Statements” contained herein on
page 3.
REAL ESTATE INVESTMENTS’ VALUE AND INCOME FLUCTUATE DUE TO VARIOUS FACTORS.
The value of real estate fluctuates depending on conditions in the general economy and the real estate business. These conditions
may also adversely impact our revenues and cash flows.
The factors that affect the value of our real estate investments include, among other things:
changes in real estate taxes and other expenses;
national, regional and local economic conditions;
competition from other available space;
local conditions such as an oversupply of space or a reduction in demand for real estate in the area;
how well we manage our properties;
the development and/or redevelopment of our properties;
changes in market rental rates;
the timing and costs associated with property improvements and rentals;
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• whether we are able to pass all or portions of any increases in operating costs through to tenants;
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• whether tenants and users such as customers and shoppers consider a property attractive;
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the financial condition of our tenants, including the extent of tenant bankruptcies or defaults;
availability of financing on acceptable terms or at all;
fluctuations in interest rates;
our ability to obtain adequate insurance;
changes in zoning laws and taxation;
government regulation;
consequences of any armed conflict involving, or terrorist attack against, the United States;
potential liability under environmental or other laws or regulations;
natural disasters;
general competitive factors; and
climate changes.
The rents we receive and the occupancy levels at our properties may decline as a result of adverse changes in any of these factors.
If rental revenues and/or occupancy levels decline, we generally would expect to have less cash available to pay indebtedness and for
distribution to shareholders. In addition, some of our major expenses, including mortgage payments, real estate taxes and maintenance
costs generally do not decline when the related rents decline.
Capital markets and economic conditions can materially affect our financial condition and results of operations and the value
of our debt and equity securities.
There are many factors that can affect the value of our debt and equity securities, including the state of the capital markets and the
economy, which over the past few years have negatively affected substantially all businesses, including ours. Demand for office and
retail space may continue to decline nationwide as it did in 2008 and 2009, due to bankruptcies, downsizing, layoffs and cost cutting.
The cost and availability of credit may be adversely affected by illiquid credit markets and wider credit spreads, which may adversely
affect our liquidity and financial condition, and the liquidity and financial condition of our tenants. Our inability or the inability of our
tenants to timely refinance maturing liabilities and access the capital markets to meet liquidity needs may materially affect our
financial condition and results of operations and the value of our debt and equity securities.
Real estate is a competitive business.
Our business segments – New York Office Properties, Washington, DC Office Properties, Retail Properties, Merchandise Mart
Properties and Toys – operate in a highly competitive environment. We have a large concentration of properties in the New York City
metropolitan area and in the Washington, DC / Northern Virginia area. We compete with a large number of property owners and
developers, some of which may be willing to accept lower returns on their investments than we are. Principal factors of competition
include rents charged, attractiveness of location, the quality of the property and the breadth and quality of services provided. Our
success depends upon, among other factors, trends of the national, regional and local economies, financial condition and operating
results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes,
governmental regulation, legislation and population trends.
11
We depend on leasing space to tenants on economically favorable terms and collecting rent from tenants who may not be able
to pay.
Our financial results depend significantly on leasing space in our properties to tenants on economically favorable terms. In
addition, because a majority of our income comes from renting of real property, our income, funds available to pay indebtedness and
funds available for distribution to shareholders will decrease if a significant number of our tenants cannot pay their rent or if we are
not able to maintain occupancy levels on favorable terms. If a tenant does not pay its rent, we may not be able to enforce our rights as
landlord without delays and may incur substantial legal costs. During periods of economic adversity, there may be an increase in the
number of tenants that cannot pay their rent and an increase in vacancy rates.
Bankruptcy or insolvency of tenants may decrease our revenue, net income and available cash.
From time to time, some of our tenants have declared bankruptcy, and other tenants may declare bankruptcy or become insolvent
in the future. In the case of our shopping centers, the bankruptcy or insolvency of a major tenant could cause us to suffer lower
revenues and operational difficulties, including leasing the remainder of the property. As a result, the bankruptcy or insolvency of a
major tenant could result in decreased revenue, net income and funds available for the payment of indebtedness or for distribution to
shareholders.
We may incur costs to comply with environmental laws.
Our operations and properties are subject to various federal, state and local laws and regulations concerning the protection of the
environment, including air and water quality, hazardous or toxic substances and health and safety. Under some environmental laws, a
current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances released
at a property. The owner or operator may also be held liable to a governmental entity or to third parties for property damage or
personal injuries and for investigation and clean-up costs incurred by those parties because of the contamination. These laws often
impose liability without regard to whether the owner or operator knew of the release of the substances or caused the release. The
presence of contamination or the failure to remediate contamination may impair our ability to sell or lease real estate or to borrow
using the real estate as collateral. Other laws and regulations govern indoor and outdoor air quality including those that can require the
abatement or removal of asbestos-containing materials in the event of damage, demolition, renovation or remodeling and also govern
emissions of and exposure to asbestos fibers in the air. The maintenance and removal of lead paint and certain electrical equipment
containing polychlorinated biphenyls (PCBs) and underground storage tanks are also regulated by federal and state laws. We are also
subject to risks associated with human exposure to chemical or biological contaminants such as molds, pollens, viruses and bacteria
which, above certain levels, can be alleged to be connected to allergic or other health effects and symptoms in susceptible individuals.
We could incur fines for environmental compliance and be held liable for the costs of remedial action with respect to the foregoing
regulated substances or tanks or related claims arising out of environmental contamination or human exposure to contamination at or
from our properties.
Each of our properties has been subject to varying degrees of environmental assessment. The environmental assessments did not,
as of this date, reveal any environmental condition material to our business. However, identification of new compliance concerns or
undiscovered areas of contamination, changes in the extent or known scope of contamination, discovery of additional sites, human
exposure to the contamination or changes in clean-up or compliance requirements could result in significant costs to us.
Inflation or deflation may adversely affect our financial condition and results of operations.
Although neither inflation nor deflation has materially impacted our operations in the recent past, increased inflation could have a
pronounced negative impact on our mortgages and interest rates and general and administrative expenses, as these costs could increase
at a rate higher than our rents. Inflation could also have an adverse effect on consumer spending which could impact our tenants’ sales
and, in turn, our percentage rents, where applicable. Conversely, deflation could lead to downward pressure on rents and other
sources of income. In addition, we own residential properties which are leased to tenants with one-year lease terms. Because these
are short-term leases, declines in market rents will impact our residential properties faster than if the leases were for longer terms.
12
Some of our potential losses may not be covered by insurance.
We maintain general liability insurance with limits of $300,000,000 per occurrence and all risk property and rental value
insurance with limits of $2.0 billion per occurrence, including coverage for terrorist acts, with sub-limits for certain perils such as
floods. Our California properties have earthquake insurance with coverage of $180,000,000 per occurrence, subject to a deductible in
the amount of 5% of the value of the affected property, up to a $180,000,000 annual aggregate.
Penn Plaza Insurance Company, LLC (“PPIC”), our wholly owned consolidated subsidiary, acts as a re-insurer with respect to all
risk property and rental value insurance and a portion of our earthquake insurance coverage, and as a direct insurer for coverage for
acts of terrorism, including nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by the Terrorism Risk Insurance
Program Reauthorization Act. Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance
companies and the Federal government with no exposure to PPIC. Coverage for NBCR losses is up to $2.0 billion per occurrence, for
which PPIC is responsible for a deductible of $3,200,000 and 15% of the balance of a covered loss and the Federal government is
responsible for the remaining 85% of a covered loss. We are ultimately responsible for any loss borne by PPIC.
We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism. However, we
cannot anticipate what coverage will be available on commercially reasonable terms in future policy years.
Our debt instruments, consisting of mortgage loans secured by our properties which are non-recourse to us, senior unsecured
notes, exchangeable senior debentures, convertible senior debentures and revolving credit agreements contain customary covenants
requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements,
we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. Further, if lenders insist on greater
coverage than we are able to obtain it could adversely affect our ability to finance our properties and expand our portfolio.
Because we operate a hotel, we face the risks associated with the hospitality industry.
We own and operate the Hotel Pennsylvania in New York City. The following factors, among others, are common to the hotel
industry and may reduce the revenues generated by the hotel, which would reduce cash available for distribution to our shareholders:
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our hotel competes for guests with other hotels, a number of which have greater marketing and financial resources;
if there is an increase in operating costs resulting from inflation and other factors, we may not be able to offset such increase
by increasing room rates;
our hotel is subject to the fluctuating and seasonal demands of business travelers and tourism;
our hotel is subject to general and local economic and social conditions that may affect demand for travel in general,
including war and terrorism; and
physical condition, which may require substantial additional capital.
Because of the ownership structure of the Hotel Pennsylvania, we face potential adverse effects from changes to the
applicable tax laws.
Under the Internal Revenue Code, REITs like us are not allowed to operate hotels directly or indirectly. Accordingly, we lease the
Hotel Pennsylvania to our taxable REIT subsidiary (“TRS”). While the TRS structure allows the economic benefits of ownership to
flow to us, the TRS is subject to tax on its income from the operations of the hotel at the federal and state level. In addition, the TRS is
subject to detailed tax regulations that affect how it may be capitalized and operated. If the tax laws applicable to a TRS are modified,
we may be forced to modify the structure for owning the hotel, and such changes may adversely affect the cash flows from the hotel.
In addition, the Internal Revenue Service, the United States Treasury Department and Congress frequently review federal income tax
legislation, and we cannot predict whether, when or to what extent new federal tax laws, regulations, interpretations or rulings will be
adopted. Any such actions may prospectively or retroactively modify the tax treatment of the TRS and, therefore, may adversely affect
our after-tax returns from the hotel.
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Compliance or failure to comply with the Americans with Disabilities Act or other safety regulations and requirements could
result in substantial costs.
The Americans with Disabilities Act (“ADA”) generally requires that public buildings, including our properties, meet certain
federal requirements related to access and use by disabled persons. Noncompliance could result in the imposition of fines by the
federal government or the award of damages to private litigants. From time to time persons have asserted claims against us with
respect to some of our properties under the ADA, but to date such claims have not resulted in any material expense or liability. If,
under the ADA, we are required to make substantial alterations and capital expenditures in one or more of our properties, including
the removal of access barriers, it could adversely affect our financial condition and results of operations, as well as the amount of cash
available for distribution to shareholders.
Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety
requirements. If we fail to comply with these requirements, we could incur fines or private damage awards. We do not know whether
existing requirements will change or whether compliance with future requirements will require significant unanticipated expenditures
that will affect our cash flow and results of operations.
We face risks associated with our tenants being designated “Prohibited Persons” by the Office of Foreign Assets Control.
Pursuant to Executive Order 13224 and other laws, the Office of Foreign Assets Control of the United States Department of the
Treasury (“OFAC”) maintains a list of persons designated as terrorists or who are otherwise blocked or banned (“Prohibited Persons”)
from conducting business or engaging in transactions in the United States. Our leases, loans and other agreements may require us to
comply with OFAC requirements. If a tenant or other party with whom we conduct business is placed on the OFAC list we may be
required to terminate the lease or other agreement. Any such termination could result in a loss of revenue or otherwise negatively
affect our financial results and cash flows.
Our business and operations would suffer in the event of system failures.
Despite system redundancy, the implementation of security measures and the existence of a disaster recovery plan for our internal
information technology systems, our systems are vulnerable to damages from any number of sources, including computer viruses,
unauthorized access, energy blackouts, natural disasters, terrorism, war and telecommunication failures. Any system failure or
accident that causes interruptions in our operations could result in a material disruption to our business. We may also incur additional
costs to remedy damages caused by such disruptions.
The occurrence of cyber incidents, or a deficiency in our cybersecurity, could negatively impact our business by causing a
disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business
relationships, all of which could negatively impact our financial results.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of our
information resources. More specifically, a cyber incident is an intentional attack or an unintentional event that can include gaining
unauthorized access to systems to disrupt operations, corrupt data, or steal confidential information. As our reliance on technology has
increased, so have the risks posed to our systems, both internal and those we have outsourced. Our three primary risks that could
directly result from the occurrence of a cyber incident include operational interruption, damage to our relationship with our tenants,
and private data exposure. We have implemented processes, procedures and controls to help mitigate these risks, but these measures,
as well as our increased awareness of a risk of a cyber incident, do not guarantee that our financial results will not be negatively
impacted by such an incident.
14
OUR INVESTMENTS ARE CONCENTRATED IN THE NEW YORK CITY METROPOLITAN AREA AND
WASHINGTON, DC / NORTHERN VIRGINIA AREA. CIRCUMSTANCES AFFECTING THESE AREAS GENERALLY
COULD ADVERSELY AFFECT OUR BUSINESS.
A significant portion of our properties are located in the New York City / New Jersey metropolitan area and Washington, DC /
Northern Virginia area and are affected by the economic cycles and risks inherent to those areas.
In 2011, approximately 74% of our EBITDA, excluding items that affect comparability, came from properties located in the New
York City / New Jersey metropolitan areas and the Washington, DC / Northern Virginia area. We may continue to concentrate a
significant portion of our future acquisitions in these areas or in other geographic real estate markets in the United States or abroad.
Real estate markets are subject to economic downturns and we cannot predict how economic conditions will impact these markets in
either the short or long term. Declines in the economy or declines in real estate markets in these areas could hurt our financial
performance and the value of our properties. The factors affecting economic conditions in these regions include:
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financial performance and productivity of the publishing, advertising, financial, technology, retail, insurance and
real estate industries;
space needs of, and budgetary constraints affecting, the United States Government, including the effect of a deficit reduction
plan and/or base closures and repositioning under the Defense Base Closure and Realignment Act of 2005, as amended;
business layoffs or downsizing;
industry slowdowns;
relocations of businesses;
changing demographics;
increased telecommuting and use of alternative work places;
infrastructure quality; and
any oversupply of, or reduced demand for, real estate.
It is impossible for us to assess the future effects of trends in the economic and investment climates of the geographic areas in
which we concentrate, and more generally of the United States, or the real estate markets in these areas. Local, national or global
economic downturns, would negatively affect our businesses and profitability.
Terrorist attacks, such as those of September 11, 2001 in New York City and the Washington, DC area, may adversely affect
the value of our properties and our ability to generate cash flow.
We have significant investments in large metropolitan areas, including the New York, Washington, DC, Chicago, Boston and San
Francisco metropolitan areas. In the aftermath of a terrorist attack, tenants in these areas may choose to relocate their businesses to
less populated, lower-profile areas of the United States that may be perceived to be less likely targets of future terrorist activity and
fewer customers may choose to patronize businesses in these areas. This, in turn, would trigger a decrease in the demand for space in
these areas, which could increase vacancies in our properties and force us to lease space on less favorable terms. As a result, the value
of our properties and the level of our revenues and cash flows could decline materially.
WE MAY ACQUIRE OR SELL ASSETS OR ENTITIES OR DEVELOP PROPERTIES. OUR FAILURE OR INABILITY
TO CONSUMMATE THESE TRANSACTIONS OR MANAGE THE RESULTS OF THESE TRANSACTIONS COULD
ADVERSELY AFFECT OUR OPERATIONS AND FINANCIAL RESULTS.
We have grown rapidly since 2001 through acquisitions. We may not be able to maintain this rapid growth and our failure to
do so could adversely affect our stock price.
We have experienced rapid growth since 2001, increasing our total assets from approximately $6.8 billion at December 31, 2001
to approximately $20.4 billion at December 31, 2011. We may not be able to maintain a similar rate of growth in the future or manage
growth effectively. Our failure to do so may have a material adverse effect on our financial condition and results of operations as well
as the amount of cash available for distributions to shareholders.
15
We may acquire or develop properties or acquire other real estate related companies and this may create risks.
We may acquire or develop properties or acquire other real estate related companies when we believe that an acquisition or
development is consistent with our business strategy. We may not, however, succeed in consummating desired acquisitions or in
completing developments on time or within budget. In addition, we may face competition in pursuing acquisition or development
opportunities that could increase our costs. When we do pursue a project or acquisition, we may not succeed in leasing newly-
developed or acquired properties at rents sufficient to cover costs of acquisition or development and operations. Difficulties in
integrating acquisitions may prove costly or time-consuming and could divert management’s attention. Acquisitions or developments
in new markets or industries where we do not have the same level of market knowledge may result in weaker than anticipated
performance. We may also abandon acquisition or development opportunities that we have begun pursuing and consequently fail to
recover expenses already incurred and have devoted management time to a matter not consummated. Furthermore, acquisitions of new
properties or companies will expose us to the liabilities of those properties or companies, some of which we may not be aware of at
the time of acquisition. Development of our existing properties presents similar risks.
From time to time we have made, and in the future we may seek to make, one or more material acquisitions. The
announcement of such a material acquisition may result in a rapid and significant decline in the price of our common shares.
We are continuously looking at material transactions that we believe will maximize shareholder value. However, an
announcement by us of one or more significant acquisitions could result in a quick and significant decline in the price of our common
shares and convertible and exchangeable securities.
It may be difficult to buy and sell real estate quickly, which may limit our flexibility.
Real estate investments are relatively difficult to buy and sell quickly. Consequently, we may have limited ability to vary our
portfolio promptly in response to changes in economic or other conditions.
We may not be permitted to dispose of certain properties or pay down the debt associated with those properties when we might
otherwise desire to do so without incurring additional costs.
As part of an acquisition of a property, or a portfolio of properties, we may agree, and in the past have agreed, not to dispose of
the acquired properties or reduce the mortgage indebtedness for a long-term period, unless we pay certain of the resulting tax costs of
the seller. These agreements could result in us holding on to properties that we would otherwise sell and not pay down or refinance.
From time to time we make investments in companies over which we do not have sole control. Some of these companies
operate in industries that differ from our current operations, with different risks than investing in real estate.
From time to time we make debt or equity investments in other companies that we may not control or over which we may not
have sole control. These investments include but are not limited to, Alexander’s, Inc. (“Alexander’s”), Toys “R” Us (“Toys”),
Lexington Realty Trust (“Lexington”), J.C. Penney Company, Inc. (“J.C. Penney”), LNR Property Corporation (“LNR”) and other
equity and mezzanine investments. Although these businesses generally have a significant real estate component, some of them
operate in businesses that are different from our primary lines of business including, without limitation, operating or managing toy
stores and department stores. Consequently, investments in these businesses, among other risks, subjects us to the operating and
financial risks of industries other than real estate and to the risk that we do not have sole control over the operations of these
businesses. From time to time we may make additional investments in or acquire other entities that may subject us to similar risks.
Investments in entities over which we do not have sole control, including joint ventures, present additional risks such as having
differing objectives than our partners or the entities in which we invest, or becoming involved in disputes, or competing with those
persons. In addition, we rely on the internal controls and financial reporting controls of these entities and their failure to maintain
effectiveness or comply with applicable standards may adversely affect us.
We are subject to risks that affect the general retail environment.
A substantial portion of our properties are in the retail shopping center real estate market and we have a significant investment in
retailers such as Toys and J.C. Penney. This means that we are subject to factors that affect the retail environment generally, including
the level of consumer spending and consumer confidence, the threat of terrorism and increasing competition from discount retailers,
outlet malls, retail websites and catalog companies. These factors could adversely affect the financial condition of our retail tenants
and the retailers in which we hold an investment and the willingness of retailers to lease space in our shopping centers, and in turn,
adversely affect us.
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Our investment in Toys subjects us to risks that are different from our other lines of business and may result in increased
seasonality and volatility in our reported earnings.
Because Toys is a retailer, its operations subject us to the risks of a retail company that are different than those presented by our
other lines of business. The business of Toys is highly seasonal. Historically, Toys fourth quarter net income accounts for more than
80% of its fiscal year net income. In addition, our fiscal year ends on December 31 whereas, as is common for retailers, Toys’ fiscal
year ends on the Saturday nearest to January 31. Therefore, we record our pro rata share of Toys’ net earnings on a one-quarter lag
basis. For example, our financial results for the year ended December 31, 2011 include Toys’ financial results for its first, second and
third quarters ended October 29, 2011, as well as Toys’ fourth quarter results of 2010. Because of the seasonality of Toys, our reported
quarterly net income shows increased volatility. We may also, in the future and from time to time, invest in other businesses that may
report financial results that are more volatile than our historical financial results.
We depend upon our anchor tenants to attract shoppers.
We own several regional malls and other shopping centers that are typically anchored by well-known department stores and other
tenants who generate shopping traffic at the mall or shopping center. The value of our properties would be adversely affected if
tenants or anchors failed to meet their contractual obligations, sought concessions in order to continue operations or ceased their
operations, including as a result of bankruptcy. If the sales of stores operating in our properties were to decline significantly due to
economic conditions, closing of anchors or for other reasons, tenants may be unable to pay their minimum rents or expense recovery
charges. In the event of a default by a tenant or anchor, we may experience delays and costs in enforcing our rights as landlord.
Our decision to dispose of real estate assets would change the holding period assumption in our valuation analyses, which
could result in material impairment losses and adversely affect our financial results.
We evaluate real estate assets for impairment based on the projected cash flow of the asset over our anticipated holding period.
If we change our intended holding period, due to our intention to sell or otherwise dispose of an asset, then under accounting
principles generally accepted in the United States of America, we must reevaluate whether that asset is impaired. Depending on the
carrying value of the property at the time we change our intention and the amount that we estimate we would receive on disposal, we
may record an impairment loss that would adversely affect our financial results. This loss could be material to our results of operations
in the period that it is recognized.
We invest in subordinated or mezzanine debt of certain entities that have significant real estate assets. These investments
involve greater risk of loss than investments in senior mortgage loans.
We invest, and may in the future invest, in subordinated or mezzanine debt of certain entities that have significant real estate
assets. These investments, which are subordinate to the mortgage loans secured by the real property, are generally secured by pledges
of the equity interests of the entities owning the underlying real estate. These investments involve a greater risk of loss than
investments in senior mortgage loans which are secured by real property. If a borrower defaults on debt to us or on debt senior to us,
or declares bankruptcy, we may not be able to recover some or all of our investment. In addition, there may be significant delays and
costs associated with the process of foreclosing on collateral securing or supporting these investments. The value of the assets
securing or supporting our investments could deteriorate over time due to factors beyond our control, including acts or omissions by
owners, changes in business, economic or market conditions, or foreclosure. Such deteriorations in value may result in the recognition
of impairment losses and/or valuation allowances on our statements of income. As of December 31, 2011, our investments in
mezzanine debt securities have an aggregate carrying amount of $133,948,000.
We evaluate the collectibility of both interest and principal of each of our loans whenever events or changes in circumstances
indicate such amounts may not be recoverable. A loan is impaired when it is probable that we will be unable to collect all amounts
due according to the existing contractual terms. When a loan is impaired, the amount of the loss accrual is calculated by comparing the
carrying amount of the investment to the present value of expected future cash flows discounted at the loan’s effective interest rate, or
as a practical expedient, to the value of the collateral if the loan is collateral dependent. There can be no assurance that our estimates
of collectible amounts will not change over time or that they will be representative of the amounts we will actually collect, including
amounts we would collect if we chose to sell these investments before their maturity. If we collect less than our estimates, we will
record impairment losses which could be material.
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We invest in marketable equity securities of companies that have significant real estate assets. The value of these investments
may decline as a result of operating performance or economic or market conditions.
We invest in marketable equity securities of publicly-traded real estate companies or companies that have significant real estate
assets, such as J.C. Penney. As of December 31, 2011, our marketable securities have an aggregate carrying amount of $741,321,000.
Significant declines in the value of these investments due to operating performance or economic or market conditions may result in the
recognition of impairment losses which could be material.
OUR ORGANIZATIONAL AND FINANCIAL STRUCTURE GIVES RISE TO OPERATIONAL AND FINANCIAL RISKS.
We May Not Be Able to Obtain Capital to Make Investments.
We depend primarily on external financing to fund the growth of our business. This is because one of the requirements of the
Internal Revenue Code of 1986, as amended, for a REIT is that it distributes 90% of its taxable income, excluding net capital gains, to
its shareholders. There is a separate requirement to distribute net capital gains or pay a corporate level tax in lieu thereof. Our access
to debt or equity financing depends on the willingness of third parties to lend or make equity investments and on conditions in the
capital markets generally. Although we believe that we will be able to finance any investments we may wish to make in the
foreseeable future, there can be no assurance that new financing will be available or available on acceptable terms. For information
about our available sources of funds, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations
— Liquidity and Capital Resources” and the notes to the consolidated financial statements in this Annual Report on Form 10-K.
Vornado Realty Trust (“Vornado”) depends on dividends and distributions from its direct and indirect subsidiaries. The
creditors and preferred security holders of these subsidiaries are entitled to amounts payable to them by the subsidiaries before the
subsidiaries may pay any dividends or distributions to Vornado.
Substantially all of Vornado’s assets are held through its Operating Partnership that holds substantially all of its properties and
assets through subsidiaries. The Operating Partnership’s cash flow is dependent on cash distributions to it by its subsidiaries, and in
turn, substantially all of Vornado’s cash flow is dependent on cash distributions to it by the Operating Partnership. The creditors of
each of Vornado’s direct and indirect subsidiaries are entitled to payment of that subsidiary’s obligations to them, when due and
payable, before distributions may be made by that subsidiary to its equity holders. Thus, the Operating Partnership’s ability to make
distributions to holders of its units depends on its subsidiaries’ ability first to satisfy their obligations to their creditors and then to
make distributions to the Operating Partnership. Likewise, Vornado’s ability to pay dividends to holders of common and preferred
shares depends on the Operating Partnership’s ability first to satisfy its obligations to its creditors and make distributions payable to
holders of preferred units and then to make distributions to Vornado.
Furthermore, the holders of preferred units of the Operating Partnership are entitled to receive preferred distributions before
payment of distributions to holders of Class A units of the Operating Partnership, including Vornado. Thus, Vornado’s ability to pay
cash dividends to its shareholders and satisfy its debt obligations depends on the Operating Partnership’s ability first to satisfy its
obligations to its creditors and make distributions to holders of its preferred units and then to holders of its Class A units, including
Vornado. As of December 31, 2011, there were six series of preferred units of the Operating Partnership not held by Vornado with a
total liquidation value of $280,955,000.
In addition, Vornado’s participation in any distribution of the assets of any of its direct or indirect subsidiaries upon the
liquidation, reorganization or insolvency, is only after the claims of the creditors, including trade creditors and preferred security
holders, are satisfied.
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We have outstanding debt, and the amount of debt and its cost may increase and refinancing may not be available on
acceptable terms.
As of December 31, 2011, we had approximately $14.5 billion of total debt outstanding, including our pro rata share of debt of
partially owned entities, and excluding $33.3 billion for our pro rata share of LNR’s liabilities related to its consolidated CMBS and
CDO trusts, which are non-recourse to LNR and its equity holders, including us. Our ratio of total debt to total enterprise value was
approximately 47%. When we say “enterprise value” in the preceding sentence, we mean market equity value of our common and
preferred shares plus total debt outstanding, including our pro rata share of debt of partially owned entities, and excluding LNR’s
liabilities related to its consolidated CMBS and CDO trusts. In the future, we may incur additional debt to finance acquisitions or
property developments and thus increase our ratio of total debt to total enterprise value. If our level of indebtedness increases, there
may be an increased risk of a credit rating downgrade or a default on our obligations that could adversely affect our financial condition
and results of operations. In addition, in a rising interest rate environment, the cost of existing variable rate debt and any new debt or
other market rate security or instrument may increase. Furthermore, we may not be able to refinance existing indebtedness in
sufficient amounts or on acceptable terms.
Covenants in our debt instruments could adversely affect our financial condition and our acquisitions and development
activities.
The mortgages on our properties contain customary covenants such as those that limit our ability, without the prior consent of the
lender, to further mortgage the applicable property or to discontinue insurance coverage. Our unsecured credit facilities, unsecured
debt securities and other loans that we may obtain in the future contain, or may contain, customary restrictions, requirements and other
limitations on our ability to incur indebtedness, including covenants that limit our ability to incur debt based upon the level of our ratio
of total debt to total assets, our ratio of secured debt to total assets, our ratio of EBITDA to interest expense, and fixed charges, and
that require us to maintain a certain level of unencumbered assets to unsecured debt. Our ability to borrow is subject to compliance
with these and other covenants. In addition, failure to comply with our covenants could cause a default under the applicable debt
instrument, and we may then be required to repay such debt with capital from other sources. Under those circumstances, other sources
of capital may not be available to us, or may be available only on unattractive terms.
We rely on debt financing, including borrowings under our unsecured credit facilities, issuances of unsecured debt securities and
debt secured by individual properties, to finance acquisitions and development activities and for working capital. If we are unable to
obtain debt financing from these or other sources, or refinance existing indebtedness upon maturity, our financial condition and results
of operations would likely be adversely affected. If we breach covenants in our debt agreements, the lenders can declare a default and,
if the debt is secured, can take possession of the property securing the defaulted loan.
Vornado may fail to qualify or remain qualified as a REIT and may be required to pay income taxes at corporate rates.
Although we believe that we will remain organized and will continue to operate so as to qualify as a REIT for federal income tax
purposes, we may fail to remain qualified in this way. Qualification as a REIT for federal income tax purposes is governed by highly
technical and complex provisions of the Internal Revenue Code for which there are only limited judicial or administrative
interpretations. Our qualification as a REIT also depends on various facts and circumstances that are not entirely within our control. In
addition, legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws with
respect to the requirements for qualification as a REIT or the federal income tax consequences of qualifying as a REIT.
If, with respect to any taxable year, we fail to maintain our qualification as a REIT and do not qualify under statutory relief
provisions, we could not deduct distributions to shareholders in computing our taxable income and would have to pay federal income
tax on our taxable income at regular corporate rates. The federal income tax payable would include any applicable alternative
minimum tax. If we had to pay federal income tax, the amount of money available to distribute to shareholders and pay our
indebtedness would be reduced for the year or years involved, and we would no longer be required to make distributions to
shareholders. In addition, we would also be disqualified from treatment as a REIT for the four taxable years following the year during
which qualification was lost, unless we were entitled to relief under the relevant statutory provisions. Although we currently intend to
operate in a manner designed to allow us to qualify as a REIT, future economic, market, legal, tax or other considerations may cause
us to revoke the REIT election or fail to qualify as a REIT.
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We face possible adverse changes in tax laws, which may result in an increase in our tax liability.
From time to time changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax
liability. The shortfall in tax revenues for states and municipalities in recent years may lead to an increase in the frequency and size of
such changes. If such changes occur, we may be required to pay additional taxes on our assets or income. These increased tax costs
could adversely affect our financial condition and results of operations and the amount of cash available for payment of dividends.
Loss of our key personnel could harm our operations and adversely affect the value of our common shares.
We are dependent on the efforts of Steven Roth, the Chairman of the Board of Trustees of Vornado, and Michael D. Fascitelli, the
President and Chief Executive Officer of Vornado. While we believe that we could find replacements for these and other key
personnel, the loss of their services could harm our operations and adversely affect the value of our common shares.
VORNADO’S CHARTER DOCUMENTS AND APPLICABLE LAW MAY HINDER ANY ATTEMPT TO ACQUIRE US.
Our Amended and Restated Declaration of Trust sets limits on the ownership of our shares.
Generally, for Vornado to maintain its qualification as a REIT under the Internal Revenue Code, not more than 50% in value of
the outstanding shares of beneficial interest of Vornado may be owned, directly or indirectly, by five or fewer individuals at any time
during the last half of Vornado’s taxable year. The Internal Revenue Code defines “individuals” for purposes of the requirement
described in the preceding sentence to include some types of entities. Under Vornado’s Amended and Restated Declaration of Trust,
as amended, no person may own more than 6.7% of the outstanding common shares of any class, or 9.9% of the outstanding preferred
shares of any class, with some exceptions for persons who held common shares in excess of the 6.7% limit before Vornado adopted
the limit and other persons approved by Vornado’s Board of Trustees. These restrictions on transferability and ownership may delay,
deter or prevent a change in control of Vornado or other transaction that might involve a premium price or otherwise be in the best
interest of the shareholders. We refer to Vornado’s Amended and Restated Declaration of Trust, as amended, as the “declaration of
trust.”
Vornado has a classified Board of Trustees and that may reduce the likelihood of certain takeover transactions.
Vornado’s Board of Trustees is divided into three classes of trustees. Trustees of each class are chosen for three-year staggered
terms. Staggered terms of trustees may reduce the possibility of a tender offer or an attempt to change control of Vornado, even
though a tender offer or change in control might be in the best interest of Vornado’s shareholders.
We may issue additional shares in a manner that could adversely affect the likelihood of certain takeover transactions.
Vornado’s declaration of trust authorizes the Board of Trustees to:
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cause Vornado to issue additional authorized but unissued common shares or preferred shares;
classify or reclassify, in one or more series, any unissued preferred shares;
set the preferences, rights and other terms of any classified or reclassified shares that Vornado issues; and
increase, without shareholder approval, the number of shares of beneficial interest that Vornado may issue.
The Board of Trustees could establish a series of preferred shares whose terms could delay, deter or prevent a change in control of
Vornado or other transaction that might involve a premium price or otherwise be in the best interest of Vornado’s shareholders,
although the Board of Trustees does not now intend to establish a series of preferred shares of this kind. Vornado’s declaration of trust
and bylaws contain other provisions that may delay, deter or prevent a change in control of Vornado or other transaction that might
involve a premium price or otherwise be in the best interest of our shareholders.
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The Maryland General Corporation Law contains provisions that may reduce the likelihood of certain takeover transactions.
Under the Maryland General Corporation Law, as amended, which we refer to as the “MGCL,” as applicable to REITs, certain
“business combinations,” including certain mergers, consolidations, share exchanges and asset transfers and certain issuances and
reclassifications of equity securities, between a Maryland REIT and any person who beneficially owns ten percent or more of the
voting power of the trust’s shares or an affiliate or an associate, as defined in the MGCL, of the trust who, at any time within the two-
year period before the date in question, was the beneficial owner of ten percent or more of the voting power of the then outstanding
voting shares of beneficial interest of the trust, which we refer to as an “interested shareholder,” or an affiliate of the interested
shareholder, are prohibited for five years after the most recent date on which the interested shareholder becomes an interested
shareholder. After that five-year period, any business combination of these kinds must be recommended by the board of trustees of the
trust and approved by the affirmative vote of at least (a) 80% of the votes entitled to be cast by holders of outstanding voting shares of
beneficial interest of the trust and (b) two-thirds of the votes entitled to be cast by holders of voting shares of beneficial interest of the
trust other than shares held by the interested shareholder with whom, or with whose affiliate, the business combination is to be
effected or held by an affiliate or associate of the interested shareholder. These supermajority voting requirements do not apply if the
trust’s common shareholders receive a minimum price, as defined in the MGCL, for their shares and the consideration is received in
cash or in the same form as previously paid by the interested shareholder for its common shares.
The provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by the board of
trustees of the applicable trust before the interested shareholder becomes an interested shareholder, and a person is not an interested
shareholder if the board of trustees approved in advance the transaction by which the person otherwise would have become an
interested shareholder.
In approving a transaction, the Board may provide that its approval is subject to compliance, at or after the time of approval, with
any terms and conditions determined by the Board. Vornado’s Board has adopted a resolution exempting any business combination
between Vornado and any trustee or officer of Vornado or its affiliates. As a result, any trustee or officer of Vornado or its affiliates
may be able to enter into business combinations with Vornado that may not be in the best interest of Vornado’s shareholders. With
respect to business combinations with other persons, the business combination provisions of the MGCL may have the effect of
delaying, deferring or preventing a change in control of Vornado or other transaction that might involve a premium price or otherwise
be in the best interest of the shareholders. The business combination statute may discourage others from trying to acquire control of
Vornado and increase the difficulty of consummating any offer.
We may change our policies without obtaining the approval of our shareholders.
Our operating and financial policies, including our policies with respect to acquisitions of real estate or other companies, growth,
operations, indebtedness, capitalization and dividends, are exclusively determined by our Board of Trustees. Accordingly, our
shareholders do not control these policies.
OUR OWNERSHIP STRUCTURE AND RELATED-PARTY TRANSACTIONS MAY GIVE RISE TO CONFLICTS OF
INTEREST.
Steven Roth and Interstate Properties may exercise substantial influence over us. They and some of our other trustees and
officers have interests or positions in other entities that may compete with us.
As of December 31, 2011, Interstate Properties, a New Jersey general partnership, and its partners owned an aggregate of
approximately 6.3% of the common shares of Vornado and 27.2% of the common stock of Alexander’s, which is described below.
Steven Roth, David Mandelbaum and Russell B. Wight, Jr. are the three partners of Interstate Properties. Mr. Roth is the Chairman of
the Board of Vornado, the managing general partner of Interstate Properties and the Chairman of the Board and Chief Executive
Officer of Alexander’s. Messrs. Wight and Mandelbaum are trustees of Vornado and also directors of Alexander’s.
Because of these overlapping interests, Mr. Roth and Interstate Properties and its partners may have substantial influence over
Vornado and on the outcome of any matters submitted to Vornado’s shareholders for approval. In addition, certain decisions
concerning our operations or financial structure may present conflicts of interest among Messrs. Roth, Mandelbaum and Wight and
Interstate Properties and our other equity or debt holders. In addition, Mr. Roth, Interstate Properties and its partners, and Alexander’s
currently and may in the future engage in a wide variety of activities in the real estate business which may result in conflicts of interest
with respect to matters affecting us, such as which of these entities or persons, if any, may take advantage of potential business
opportunities, the business focus of these entities, the types of properties and geographic locations in which these entities make
investments, potential competition between business activities conducted, or sought to be conducted, competition for properties and
tenants, possible corporate transactions such as acquisitions and other strategic decisions affecting the future of these entities.
21
We currently manage and lease the real estate assets of Interstate Properties under a management agreement for which we receive
an annual fee equal to 4% of base rent and percentage rent. The management agreement has a one-year term and is automatically
renewable unless terminated by either of the parties on 60 days’ notice at the end of the term. Because of the relationship among
Vornado, Interstate Properties and Messrs. Roth, Mandelbaum and Wight, as described above, the terms of the management
agreement and any future agreements between us and Interstate Properties may not be comparable to those we could have negotiated
with an unaffiliated third party.
There may be conflicts of interest between Alexander’s and us.
As of December 31, 2011, we owned 32.4% of the outstanding common stock of Alexander’s. Alexander’s is a REIT engaged in
leasing, managing, developing and redeveloping properties, focusing primarily on the locations where its department stores operated
before they ceased operations in 1992. Alexander’s has seven properties, which are located in the greater New York metropolitan area.
In addition to the 2.0% that they indirectly own through Vornado, Interstate Properties, which is described above, and its partners
owned 27.2% of the outstanding common stock of Alexander’s as of December 31, 2011. Mr. Roth is the Chairman of the Board of
Vornado, the managing general partner of Interstate Properties, and the Chairman of the Board and Chief Executive Officer of
Alexander’s. Messrs. Wight and Mandelbaum are trustees of Vornado and also directors of Alexander’s and general partners of
Interstate Properties. Michael D. Fascitelli is the President and Chief Executive Officer of Vornado and the President of Alexander’s
and Dr. Richard West is a trustee of Vornado and a director of Alexander’s. In addition, Joseph Macnow, our Executive Vice
President and Chief Financial Officer, holds the same position with Alexander’s. Alexander’s common stock is listed on the New
York Stock Exchange under the symbol “ALX.”
We manage, develop and lease Alexander’s properties under management and development agreements and leasing agreements
under which we receive annual fees from Alexander’s. These agreements have a one-year term expiring in March of each year and are
all automatically renewable. Because Vornado and Alexander’s share common senior management and because certain of the trustees
of Vornado constitute a majority of the directors of Alexander’s, the terms of the foregoing agreements and any future agreements
between us and Alexander’s may not be comparable to those we could have negotiated with an unaffiliated third party.
For a description of Interstate Properties’ ownership of Vornado and Alexander’s, see “Steven Roth and Interstate Properties may
exercise substantial influence over us. They and some of our other trustees and officers have interests or positions in other entities that
may compete with us” above.
22
THE NUMBER OF SHARES OF VORNADO REALTY TRUST AND THE MARKET FOR THOSE SHARES GIVE RISE
TO VARIOUS RISKS.
The trading price of our common shares has been volatile and may fluctuate.
The trading price of our common shares has been volatile and may continue to fluctuate widely as a result of a number of factors,
many of which are outside our control. In addition, the stock market is subject to fluctuations in the share prices and trading volumes
that affect the market prices of the shares of many companies. These broad market fluctuations have in the past and may in the future
adversely affect the market price of our common shares. Among the factors that could affect the price of our common shares are:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our financial condition and performance;
the financial condition of our tenants, including the extent of tenant bankruptcies or defaults;
actual or anticipated quarterly fluctuations in our operating results and financial condition;
our dividend policy;
the reputation of REITs and real estate investments generally and the attractiveness of REIT equity securities in
comparison to other equity securities, including securities issued by other real estate companies, and fixed
income securities;
uncertainty and volatility in the equity and credit markets;
changes in revenue or earnings estimates or publication of research reports and recommendations by financial
analysts or actions taken by rating agencies with respect to our securities or those of other real estate investment
trusts;
failure to meet analysts’ revenue or earnings estimates;
speculation in the press or investment community;
strategic actions by us or our competitors, such as acquisitions or restructurings;
the extent of institutional investor interest in us;
the extent of short-selling of our common shares and the shares of our competitors;
fluctuations in the stock price and operating results of our competitors;
general financial and economic market conditions and, in particular, developments related to market conditions
for real estate investment trusts and other real estate related companies;
domestic and international economic factors unrelated to our performance; and
all other risk factors addressed elsewhere in this Annual Report on the Form 10-K.
A significant decline in our stock price could result in substantial losses for shareholders.
Vornado has many shares available for future sale, which could hurt the market price of its shares.
The interests of our current shareholders could be diluted if we issue additional equity securities. As of December 31, 2011, we
had authorized but unissued, 64,919,980 common shares of beneficial interest, $.04 par value and 67,813,291 preferred shares of
beneficial interest, no par value; of which 28,304,971 common shares are reserved for issuance upon redemption of Class A Operating
Partnership units, convertible securities and employee stock options and 5,800,000 preferred shares are reserved for issuance upon
redemption of preferred Operating Partnership units. Any shares not reserved may be issued from time to time in public or private
offerings or in connection with acquisitions. In addition, common and preferred shares reserved may be sold upon issuance in the
public market after registration under the Securities Act or under Rule 144 under the Securities Act or other available exemptions from
registration. We cannot predict the effect that future sales of our common and preferred shares or Operating Partnership Class A and
preferred units will have on the market prices of our outstanding shares.
Increased market interest rates may hurt the value of our common and preferred shares.
We believe that investors consider the distribution rate on REIT shares, expressed as a percentage of the price of the shares,
relative to market interest rates as an important factor in deciding whether to buy or sell the shares. If market interest rates go up,
prospective purchasers of REIT shares may expect a higher distribution rate. Higher interest rates would likely increase our borrowing
costs and might decrease funds available for distribution. Thus, higher market interest rates could cause the market price of our
common and preferred shares to decline.
23
ITEM 1B. UNRESOLVED STAFF COMMENTS
There are no unresolved comments from the staff of the Securities Exchange Commission as of the date of this Annual Report on
Form 10-K.
ITEM 2.
PROPERTIES
We operate in five business segments: New York Office Properties, Washington, DC Office Properties, Retail Properties,
Merchandise Mart Properties and Toys “R” Us. The following pages provide details of our real estate properties.
24
ITEM 2.
PROPERTIES - Continued
Property
NEW YORK OFFICE:
New York City:
Penn Plaza:
One Penn Plaza
(ground leased through 2098)
Two Penn Plaza
Eleven Penn Plaza
100 West 33rd Street
330 West 34th Street
(ground leased through 2148 - 34.8%
ownership interest in the land)
Total Penn Plaza
East Side:
909 Third Avenue
(ground leased through 2063)
Total East Side
West Side:
888 Seventh Avenue
(ground leased through 2067)
1740 Broadway
57th Street
825 Seventh Avenue
Total West Side
Park Avenue:
350 Park Avenue
280 Park Avenue
Total Park Avenue
Grand Central:
90 Park Avenue
%
%
Ownership
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
100.0 %
94.5 % $
56.40
2,466,000
2,466,000
-
$
- BMG Columbia House, Cisco, Kmart, MWB Leasing,
Parsons Brinkerhoff, United Health Care,
United States Customs Department,
URS Corporation Group Consulting
100.0 %
97.1 %
47.50
1,589,000
1,589,000
100.0 %
95.5 %
54.25
1,075,000
1,075,000
100.0 %
93.6 %
47.93
847,000
847,000
-
-
-
425,000 LMW Associates, EMC, Forest Electric, IBI,
Madison Square Garden, McGraw-Hill Companies, Inc.
330,000 Macy's, Madison Square Garden, Rainbow Media Holdings
159,361 Bank of America, Draftfcb
100.0 %
100.0 %
26.53
635,000
460,000
175,000 *
50,150 City of New York, Interieurs Inc.
95.7 %
49.96
6,612,000
6,437,000
175,000
964,511
100.0 %
92.4 %
55.94 (2)
1,332,000
1,332,000
150 East 58th Street
100.0 %
92.8 %
60.64
537,000
537,000
92.5 %
57.29
1,869,000
1,869,000
100.0 %
98.8 %
81.08
867,000
867,000
100.0 %
99.3 %
61.76
597,000
597,000
50.0 %
50.0 %
93.9 %
100.0 %
46.65
45.44
188,000
165,000
188,000
165,000
98.6 %
67.93
1,817,000
1,817,000
100.0 %
95.4 %
77.82
557,000
557,000
-
-
-
-
-
-
-
-
-
203,217
J.P. Morgan Securities Inc., Citibank, Forest Laboratories,
Geller & Company, Morrison Cohen LLP, Robeco USA Inc.,
United States Post Office,
The Procter & Gamble Distributing LLC.
- Castle Harlan, Tournesol Realty LLC (Peter Marino),
Various showroom tenants
203,217
318,554 New Line Realty, Soros Fund,
TPG-Axon Capital, Vornado Executive Headquarters
- Davis & Gilbert, Limited Brands,
Dept. of Taxation of the State of N.Y.
21,864 Various
20,080 Young & Rubicam
360,498
430,000 Tweedy Browne Company, MFA Financial Inc., M&T Bank,
Ziff Brothers Investment Inc., Kissinger Associates, Inc.
49.5 %
100.0 %
78.63
1,218,000
943,000
275,000
737,678 Cohen & Steers Inc., Credit Suisse (USA) Inc.,
General Electric Capital Corp., Investcorp International Inc.,
National Football League
98.5 %
78.38
1,775,000
1,500,000
275,000
1,167,678
100.0 %
98.4 %
59.02
910,000
910,000
-
- Alston & Bird, Amster, Rothstein & Ebenstein,
Capital One N.A., First Manhattan Consulting,
Sanofi-Synthelabo Inc., STWB Inc.
330 Madison Avenue
25.0 %
100.0 %
59.96
809,000
766,000
43,000 *
150,000 Acordia Northeast Inc., Artio Global Management,
Dean Witter Reynolds Inc., HSBC Bank AFS,
GPFT Holdco LLC (Guggenheim LLC), Jones Lang LaSalle
Inc.
Total Grand Central
99.2 %
59.46
1,719,000
1,676,000
43,000
150,000
25
ITEM 2.
PROPERTIES - Continued
%
%
Ownership
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
100.0 %
100.0 % $
76.46
324,000
324,000
-
$
Property
NEW YORK OFFICE (Continued):
Madison/Fifth:
640 Fifth Avenue
666 Fifth Avenue
595 Madison Avenue
689 Fifth Avenue
Total Madison/Fifth
United Nations:
866 United Nations Plaza
Midtown South:
770 Broadway
One Park Avenue
Total Midtown South
Rockefeller Center:
1290 Avenue of the Americas
Downtown:
20 Broad Street
(ground leased through 2081)
40 Fulton Street
Total Downtown
Total New York City
New Jersey
Paramus
Total New York Office
Vornado's Ownership Interest
49.5 %
81.1 %
81.29
1,437,000
1,437,000
100.0 %
93.2 %
65.34
321,000
321,000
100.0 %
94.1 %
75.13
89,000
89,000
86.2 %
77.96
2,171,000
2,171,000
100.0 %
94.4 %
52.41
358,000
358,000
100.0 %
99.8 %
54.67
1,078,000
1,078,000
30.3 %
95.2 %
42.59
932,000
932,000
97.7 %
49.07
2,010,000
2,010,000
70.0 %
96.6 %
69.07
2,081,000
2,081,000
100.0 %
98.1 %
52.38
472,000
472,000
- ROC Capital Management LP, Citibank N.A.,
Fidelity Investments, Hennes & Mauritz,
Janus Capital Group Inc., GSL Enterprises Inc.,
Scout Capital Management,
Legg Mason Investment Counsel
1,035,884 Citibank N.A., Fulbright & Jaworski, Integrated Holding Group,
Vinson & Elkins LLP, Uniqlo
- Beauvais Carpets, Coach, Levin Capital Strategies LP,
Prada, Cosmetech Mably Int'l LLC.
- Elizabeth Arden, Red Door Salons, Zara,
Yamaha Artist Services Inc.
1,035,884
44,978 Fross Zelnick, Mission of Japan,
The United Nations, Mission of Finland
353,000 AOL, J. Crew, Kmart, Structure Tone,
Nielsen Company (US) Inc.
250,000 New York University, Coty Inc.,
Public Service Mutual Insurance
603,000
413,111 AXA Equitable Life Insurance, Bank of New York Mellon,
Broadpoint Gleacher Securities Group, Bryan Cave LLP,
Microsoft Corporation, Morrison & Foerster LLP,
Warner Music Group, Cushman & Wakefield, Fitzpatrick,
Cella, Harper & Scinto, Columbia University
- New York Stock Exchange
- Graphnet Inc., Market News International Inc., Sapient Corp.
-
-
-
-
-
-
-
-
-
-
-
-
-
100.0 %
89.3 %
95.0 %
90.6 %
34.57
46.21
53.63
250,000
250,000
722,000
722,000
21,134,000
20,641,000
493,000
4,942,877
100.0 %
86.8 %
21.91
132,000
132,000
-
- Vornado's Administrative Headquarters
95.3 % $
59.68
21,266,000
20,773,000
95.6 % $
58.70
17,868,000
17,546,000
493,000
322,000
$
$
4,942,877
3,583,787
* We do not capitalize interest or real estate taxes on this space.
(1) Weighted Average Annual Rent PSF excludes ground rent, storage rent and garages.
(2) Excludes US Post Office leased through 2038 (including five 5-year renewal options for which the annual escalated rent is $11.23 PSF).
26
ITEM 2.
PROPERTIES - Continued
Property
WASHINGTON, DC OFFICE:
Crystal City:
2011-2451 Crystal Drive - 5 buildings
%
%
Ownership
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
100.0 %
94.9 % $
41.33
2,300,000
2,300,000
-
$
274,305 General Services Administration, Lockheed Martin,
S. Clark Street / 12th Street - 5 buildings
100.0 %
97.1 %
41.60
1,511,000
1,511,000
100.0 %
95.6 %
40.22
1,485,000
1,485,000
100.0 %
97.2 %
39.80
869,000
869,000
100.0 %
100.0 %
32.47
529,000
529,000
2001 Jefferson Davis Highway
100.0 %
71.8 %
35.72
162,000
162,000
100.0 %
100.0 %
39.27
309,000
84,000
225,000
- General Services Administration
Conservation International, Boeing,
Smithsonian Institution, Natl. Consumer Coop. Bank,
Archstone Trust, Council on Foundations,
Vornado / Charles E. Smith Headquarters,
KBR, General Dynamics, Scitor Corp.,
Food Marketing Institute
-
-
-
-
141,500 General Services Administration,
SAIC, Inc., Boeing, L-3 Communications,
The Int'l Justice Mission
121,067 General Services Administration,
Alion Science & Technologies, Booz Allen,
Arete Associates, Battelle Memorial Institute
- General Services Administration,
Lockheed Martin
- General Services Administration,
Public Broadcasting Service
-
-
-
- National Crime Prevention, Institute for Psychology,
Qinetiq North America
- Various
- Various
100.0 %
100.0 %
60.4 %
94.5 %
100.0 %
95.5 %
34.74
43.99
40.10
81,000
57,000
81,000
57,000
7,303,000
7,078,000
225,000
536,872
100.0 %
93.4 %
41.81
682,000
682,000
55.0 %
49.1 %
68.59
607,000
607,000
100.0 %
100.0 %
98.5 %
94.0 %
100.0 %
100.0 %
100.0 %
97.0 %
81.8 %
96.7 %
55.0 %
90.6 %
100.0 %
87.3 %
43.09
59.29
44.06
46.43
63.48
44.53
43.94
409,000
409,000
380,000
380,000
261,000
261,000
239,000
239,000
231,000
231,000
214,000
214,000
203,000
203,000
-
-
-
-
-
-
-
-
-
98,239 Family Health International
292,700 Baker Botts, LLP, General Electric
- General Services Administration
150,000 Greenberg Traurig, LLP, US Green Building Council,
American Insurance Association, RTKL Associates,
Cassidy & Turley
44,330 General Services Administration
28,728 American Enterprise Institute
115,022 Paul, Hastings, Janofsky & Walker LLP,
Millennium Challenge Corporation
- AFSCME
14,853 General Services Administration
27
1550-1750 Crystal Drive /
241-251 18th Street - 4 buildings
1800, 1851 and 1901 South Bell Street
- 3 buildings
2100 / 2200 Crystal Drive - 2 buildings
223 23rd Street / 2221 South Clark Street
- 2 buildings
Crystal City Shops at 2100
Crystal Drive Retail
Total Crystal City
Central Business District:
Universal Buildings
1825-1875 Connecticut Avenue, NW
- 2 buildings
Warner Building - 1299 Pennsylvania
Avenue, NW
409 3rd Street, NW
2101 L Street, NW
1750 Pennsylvania Avenue, NW
1150 17th Street, NW
Bowen Building - 875 15th Street, NW
1101 17th Street, NW
1730 M Street, NW
ITEM 2.
PROPERTIES - Continued
Property
WASHINGTON, DC OFFICE (Continued):
1726 M Street, NW
Waterfront Station
1501 K Street, NW
2.5 %
5.0 %
Total Central Business District
I-395 Corridor:
Skyline Place - 7 buildings
One Skyline Tower
Total I-395 Corridor
Rosslyn / Ballston:
2200 / 2300 Clarendon Blvd
(Courthouse Plaza) - 2 buildings
(ground leased through 2062)
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
100.0 %
85.9 % $
39.58
90,000
90,000
-
$
- Aptima, Inc., Nelnet Corporation
1399 New York Avenue, NW
100.0 %
93.2 %
98.2 %
59.36
76.57
379,000
379,000
128,000
128,000
-
-
- Sidley Austin LLP, UBS
- Bloomberg
-
-
1,058,000
-
1,058,000 *
-
88.3 %
50.21
4,881,000
3,823,000
1,058,000
743,872
100.0 %
68.3 %
34.93
2,118,000
2,118,000
100.0 %
100.0 %
32.72
518,000
518,000
100.0 %
74.5 %
34.34
2,636,000
2,636,000
100.0 %
94.4 %
40.50
634,000
634,000
Rosslyn Plaza - Office - 4 buildings
46.2 %
81.8 %
36.11
731,000
731,000
Total Rosslyn / Ballston
Reston:
Reston Executive - 3 buildings
Commerce Executive - 3 buildings
Total Reston
Rockville/Bethesda:
Democracy Plaza One
(ground leased through 2084)
Tysons Corner:
Fairfax Square - 3 buildings
Pentagon City:
Fashion Centre Mall
Washington Tower
Total Pentagon City
90.0 %
39.03
1,365,000
1,365,000
100.0 %
68.0 %
100.0 %`
86.2 %
32.23
28.55
494,000
494,000
399,000
399,000
76.1 %
30.38
893,000
893,000
100.0 %
90.9 %
41.04
214,000
214,000
20.0 %
85.8 %
37.23
528,000
528,000
7.5 %
7.5 %
99.4 %
100.0 %
39.28
47.01
819,000
819,000
170,000
170,000
99.8 %
40.61
989,000
989,000
Total Washington, DC office properties
Vornado's Ownership Interest
88.5 % $
41.13
18,809,000
17,526,000
1,283,000
88.7 % $
40.63
15,316,000
15,065,000
251,000
28
-
-
-
-
-
-
-
-
-
-
-
-
-
-
543,300 General Services Administration, SAIC, Inc.,
Northrop Grumman, Axiom Resource Management,
Booz Allen, Jacer Corporation, Intellidyne, Inc.
134,700 General Services Administration
678,000
53,344 Arlington County, General Services Administration,
AMC Theaters
56,680
General Services Administration
110,024
93,000 SAIC, Inc., Quadramed Corp
- L-3 Communications, Allworld Language Consultants,
BT North America
93,000
- National Institutes of Health
70,974 EDS Information Services, Dean & Company,
Womble Carlyle
410,000 Macy's, Nordstrom
40,000 The Rand Corporation
450,000
2,682,742
2,048,000
$
$
ITEM 2.
PROPERTIES - Continued
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
Property
WASHINGTON, DC OFFICE (Continued):
Other:
For rent residential:
Riverhouse (1,680 units)
West End 25 (283 units)
220 20th Street (265 units)
Rosslyn Plaza (196 units)
Crystal City Hotel
Warehouses
Other - 3 buildings
Total Other
Total Washington, DC Properties
Vornado's Ownership Interest
100.0 %
100.0 %
100.0 %
96.6 % $
96.4 %
96.9 %
43.7 %
96.9 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
-
-
-
-
-
-
-
1,802,000
1,802,000
272,000
272,000
272,000
272,000
253,000
253,000
266,000
266,000
160,000
129,000
11,000
9,000
-
-
-
-
-
31,000 *
2,000 *
$
259,546
101,671
75,037
-
-
-
-
3,036,000
3,003,000
33,000
436,254
89.8 % $
41.13
21,845,000 (2)
20,529,000
1,316,000
90.0 % $
40.63
18,209,000
17,925,000
284,000
$
$
3,118,996
2,484,000
* We do not capitalize interest or real estate taxes on this space.
(1) Weighted Average Annual Rent PSF excludes ground rent, storage rent and garages.
(2) Excludes 24,000 square feet representing our 7.5% pro rata share of the Ritz Carlton building which is owned by the ground lessee on land leased by us.
29
ITEM 2.
PROPERTIES - Continued
Property
RETAIL:
STRIP SHOPPING CENTERS:
New Jersey:
Wayne Town Center, Wayne
(ground leased through 2064)
North Bergen (Tonnelle Avenue)
Totowa
Garfield
Bricktown
%
%
Ownership
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
In Service
Under Development
Total
Property
Owned by
Company
Owned By
Tenant
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
100.0 %
100.0 % $
29.60
717,000
29,000
242,000
446,000
$
- JCPenney
100.0 %
100.0 %
24.19
410,000
204,000
100.0 %
100.0 %
18.59
317,000
178,000
100.0 %
100.0 %
26.80
301,000
21,000
100.0 %
98.7 %
17.24
279,000
276,000
Union (Route 22 and Morris Avenue)
100.0 %
100.0 %
25.63
276,000
113,000
Hackensack
Bergen Town Center - East, Paramus
East Hanover (240 Route 10 West)
Cherry Hill
Jersey City
100.0 %
74.8 %
21.70
275,000
269,000
100.0 %
100.0 %
16.00
272,000
26,000
100.0 %
96.2 %
17.75
268,000
262,000
100.0 %
91.5 %
13.23
263,000
76,000
100.0 %
100.0 %
21.79
236,000
66,000
East Brunswick (325 - 333 Route 18 South)
100.0 %
100.0 %
15.95
232,000
222,000
Union (2445 Springfield Avenue)
100.0 %
100.0 %
17.85
232,000
232,000
100.0 %
94.8 %
14.19
231,000
179,000
100.0 %
83.9 %
22.50
227,000
87,000
206,000
139,000
145,000
3,000
163,000
6,000
167,000
6,000
187,000
170,000
10,000
-
52,000
140,000
-
-
75,000 Wal-Mart, BJ's Wholesale Club
25,703 (2) The Home Depot, Bed Bath & Beyond (3), Marshalls
135,000
- Wal-Mart
-
-
-
33,153 (2) Kohl's, ShopRite, Marshalls
33,551 (2) Lowe's, Toys "R" Us
42,082 (2) The Home Depot
79,000
- Lowe's, REI
-
-
-
-
-
-
-
29,570 (2) The Home Depot, Dick's Sporting Goods, Marshalls
14,387 (2) Wal-Mart, Toys "R" Us
21,040 (2) Lowe's, P.C. Richard & Son
25,817 (2) Kohl's, Dick's Sporting Goods, P.C. Richard & Son,
T.J. Maxx
29,570 (2) The Home Depot
18,026 (2) Kohl's, Stop & Shop
21,438 (2) Wal-Mart
100.0 %
100.0 %
13.54
219,000
34,000
-
185,000
-
Middletown
Woodbridge
North Plainfield
(ground leased through 2060)
Marlton
Manalapan
East Rutherford
100.0 %
100.0 %
13.34
213,000
209,000
100.0 %
100.0 %
15.30
208,000
206,000
100.0 %
98.7 %
32.26
197,000
42,000
East Brunswick (339-341 Route 18 South)
100.0 %
100.0 %
-
196,000
33,000
Bordentown
Morris Plains
Dover
Delran
100.0 %
80.4 %
7.25
179,000
83,000
100.0 %
98.2 %
19.50
177,000
176,000
100.0 %
93.9 %
11.31
173,000
167,000
100.0 %
7.2 %
-
171,000
40,000
Lodi (Route 17 North)
100.0 %
100.0 %
10.91
171,000
171,000
Watchung
Lawnside
Hazlet
100.0 %
95.6 %
23.20
170,000
54,000
100.0 %
100.0 %
13.13
145,000
142,000
100.0 %
100.0 %
2.44
123,000
123,000
30
4,000
2,000
155,000
163,000
-
1,000
6,000
3,000
-
116,000
3,000
-
-
-
-
-
17,913 (2) Kohl's (3), ShopRite, PetSmart
21,836 (2) Best Buy, Bed Bath & Beyond, Babies "R" Us
14,103 (2) Lowe's
12,226 (2) Lowe's, LA Fitness (lease not commenced)
96,000 *
- ShopRite
-
-
22,178 (2) Kohl's, ShopRite
13,648 (2) ShopRite, T.J. Maxx
128,000 *
-
-
-
-
-
11,771 (2) National Wholesale Liquidators
15,638 (2) BJ's Wholesale Club
11,089 (2) The Home Depot, PetSmart
- Stop & Shop
ITEM 2.
PROPERTIES - Continued
%
%
Ownership
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
In Service
Under Development
Total
Property
Owned by
Company
Owned By
Tenant
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
100.0 %
100.0 % $
14.24
104,000
32,000
100.0 %
100.0 %
6.25
96,000
89,000
100.0 %
40.7 %
100.0 %
90.7 %
23.21
22.16
85,000
85,000
78,000
78,000
East Hanover (200 Route 10 West)
100.0 %
86.9 %
23.13
76,000
76,000
Paramus
(ground leased through 2033)
100.0 %
100.0 %
42.23
63,000
63,000
North Bergen (Kennedy Boulevard)
100.0 %
100.0 %
62,000
6,000
56,000
100.0 %
92.1 %
56,000
56,000
29.78
20.68
Property
RETAIL (Continued):
Kearny
Turnersville
Lodi (Washington Street)
Carlstadt
(ground leased through 2050)
South Plainfield
(ground leased through 2039)
Englewood
Eatontown
East Hanover (280 Route 10 West)
Montclair
Total New Jersey
New York:
Poughkeepsie
100.0 %
79.7 %
26.08
41,000
41,000
100.0 %
100.0 %
28.09
30,000
30,000
100.0 %
94.0 %
100.0 %
100.0 %
32.00
23.34
26,000
26,000
18,000
18,000
100.0 %
84.3 %
8.04
519,000
519,000
-
7,613,000
4,320,000
2,224,000
1,069,000
566,720
72,000
7,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
- Pathmark, Marshalls
- Haynes Furniture
9,422 Rite Aid
7,304 Stop & Shop
10,122 (2) Loehmann's
- 24 Hour Fitness
5,289 (2) Waldbaum's
5,317 (2) Staples
12,077 New York Sports Club
- Petco
4,720 (2) REI
2,730 (2) Whole Foods Market
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- Kmart, Burlington Coat Factory, ShopRite,
Hobby Lobby, Christmas Tree Shops,
Bob's Discount Furniture
- Kmart, Toys "R" Us, Key Food
- BJ's Wholesale Club (lease not commenced),
T.J. Maxx, Toys "R" Us
17,287 (2) Kmart, Marshalls, Old Navy
4,549 (2) Wal-Mart
29,026 Target, A&P
22,178 (2) The Home Depot, Staples
17,237 Western Beef
- Kohl's, Ollie's Bargain Outlet
- Bank of America
- Stop & Shop
- Stop & Shop
- Wal-Mart
- ALDI, Planet Fitness, T.G.I. Friday's
Bronx (Bruckner Boulevard)
Buffalo (Amherst)
100.0 %
94.1 %
21.27
500,000
386,000
100.0 %
85.6 %
5.65
296,000
227,000
114,000
69,000
Huntington
Rochester
Mt. Kisco
100.0 %
90.4 %
14.00
208,000
208,000
-
100.0 %
100.0 %
-
205,000
-
205,000
100.0 %
100.0 %
21.84
189,000
72,000
117,000
Freeport (437 East Sunrise Highway)
100.0 %
100.0 %
18.61
173,000
173,000
Staten Island
Rochester (Henrietta)
(ground leased through 2056)
Albany (Menands)
New Hyde Park (ground and building
leased through 2029)
Inwood
North Syracuse (ground and building
leased through 2014)
100.0 %
94.2 %
20.51
165,000
165,000
100.0 %
91.3 %
3.31
158,000
158,000
100.0 %
74.0 %
9.00
140,000
140,000
100.0 %
100.0 %
18.73
101,000
101,000
100.0 %
97.9 %
21.01
100,000
100,000
100.0 %
100.0 %
-
98,000
-
98,000
Bronx (1750-1780 Gun Hill Road)
100.0 %
73.3 %
34.09
83,000
83,000
-
31
ITEM 2.
PROPERTIES - Continued
Property
RETAIL (Continued):
West Babylon
Queens
Commack
(ground and building leased through 2021)
Dewitt
(ground leased through 2041)
Freeport (240 West Sunrise Highway)
(ground and building leased through 2040)
Oceanside
Total New York
Pennsylvania:
Allentown
Philadelphia
Wilkes-Barre
Lancaster
Bensalem
Broomall
Bethlehem
Upper Moreland
York
Levittown
Glenolden
Wilkes-Barre
(ground and building leased through 2014)
Wyomissing
(ground and building leased through 2065)
Springfield
(ground and building leased through 2025)
Total Pennsylvania
California:
San Jose
%
%
Ownership
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
In Service
Under Development
Total
Property
Owned by
Company
Owned By
Tenant
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
100.0 %
85.7 % $
11.89
79,000
79,000
100.0 %
100.0 %
36.26
56,000
56,000
100.0 %
100.0 %
21.45
47,000
47,000
100.0 %
100.0 %
20.46
46,000
46,000
100.0 %
100.0 %
18.44
44,000
44,000
100.0 %
100.0 %
27.83
16,000
16,000
-
-
-
-
-
-
3,223,000
2,620,000
603,000
100.0 %
100.0 %
15.22
627,000 (4)
270,000
357,000 (4)
100.0 %
78.6 %
13.29
428,000
428,000
-
100.0 %
83.3 %
13.33
329,000 (4)
204,000
125,000 (4)
100.0 %
100.0 %
4.61
228,000
58,000
100.0 %
98.9 %
11.38
185,000
177,000
100.0 %
100.0 %
10.73
169,000
147,000
100.0 %
81.5 %
6.16
167,000
164,000
100.0 %
100.0 %
2.00
122,000
122,000
100.0 %
100.0 %
8.69
110,000
110,000
100.0 %
100.0 %
6.25
105,000
105,000
170,000
8,000
22,000
3,000
-
-
-
100.0 %
97.5 %
26.00
102,000
10,000
92,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
- Waldbaum's
- New York Sports Club, Devry
- PetSmart
- Best Buy
- Bob's Discount Furniture
- Party City
90,277
31,106 (2) Wal-Mart (4), ShopRite, Burlington Coat Factory,
T.J. Maxx, Dick's Sporting Goods
- Kmart, Health Partners
20,475 Target (4), Babies "R" Us, Ross Dress for Less
5,601 (2) Lowe's, Weis Markets
15,439 (2) Kohl's, Ross Dress for Less, Staples
11,089 (2) Giant Food (3), A.C. Moore, PetSmart
5,800 (2) Giant Food, Superpetz
- Benjamin Foods
5,402 (2) Ashley Furniture
- Haynes Furniture
7,108 (2) Wal-Mart
100.0 %
100.0 %
6.53
81,000
41,000
100.0 %
89.0 %
14.47
79,000
79,000
100.0 %
100.0 %
20.90
41,000
41,000
-
-
-
40,000 *
- Ollie's Bargain Outlet
-
-
- LA Fitness, PetSmart
- PetSmart
2,773,000
1,956,000
777,000
40,000
102,020
-
-
-
112,476 Target (4), The Home Depot, Toys "R" Us, Best Buy
100,000 Target (lease not commenced), Marshalls, Old Navy,
Nordstrom Rack, Ross Dress for Less
- Trader Joe's
100.0 %
92.9 %
29.07
647,000 (4)
492,000
155,000 (4)
Beverly Connection, Los Angeles
100.0 %
80.8 %
42.01
307,000
307,000
Pasadena (ground leased through 2077)
100.0 %
57.3 %
29.85
133,000
133,000
-
-
32
ITEM 2.
PROPERTIES - Continued
%
%
Ownership
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
In Service
Under Development
Total
Property
Owned by
Company
Owned By
Tenant
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
Property
RETAIL (Continued):
San Francisco (2675 Geary Street)
(ground and building leased through 2043)
Redding
Signal Hill
Vallejo
(ground leased through 2043)
Merced
100.0 %
100.0 % $
50.34
55,000
55,000
100.0 %
100.0 %
11.19
45,000
45,000
100.0 %
100.0 %
24.08
45,000
45,000
100.0 %
100.0 %
17.51
45,000
45,000
100.0 %
100.0 %
14.31
31,000
31,000
San Francisco (3700 Geary Boulevard)
100.0 %
100.0 %
30.00
30,000
30,000
Walnut Creek (1149 South Main Street)
100.0 %
100.0 %
45.11
29,000
29,000
Total California
Maryland:
Baltimore (Towson)
100.0 %
86.0 %
15.33
150,000
150,000
1,367,000
1,212,000
155,000
Annapolis
(ground and building leased through 2042)
100.0 %
100.0 %
8.99
128,000
128,000
Glen Burnie
Rockville
Wheaton
(ground leased through 2060)
Total Maryland
Massachusetts:
Chicopee
Springfield
Milford
(ground and building leased through 2019)
Cambridge
(ground and building leased through 2033)
Dorchester
Total Massachusetts
Florida:
Tampa (Hyde Park Village)
100.0 %
90.6 %
10.42
121,000
65,000
56,000
100.0 %
84.4 %
22.96
94,000
94,000
100.0 %
100.0 %
14.87
66,000
66,000
-
-
559,000
503,000
56,000
100.0 %
100.0 %
-
224,000
-
224,000
100.0 %
97.8 %
16.39
182,000
33,000
100.0 %
100.0 %
8.01
83,000
83,000
100.0 %
100.0 %
19.84
48,000
48,000
100.0 %
100.0 %
32.83
45,000
45,000
149,000
-
-
-
582,000
209,000
373,000
75.0 %
79.7 %
21.44
264,000
264,000
Tampa (1702 North Dale Mabry)
100.0 %
100.0 %
19.80
45,000
45,000
Total Florida
309,000
309,000
33
-
-
-
-
-
-
-
-
-
-
-
-
-
$
- Best Buy
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- PetSmart
- Best Buy
- Best Buy
- PetSmart
- OfficeMax
- Barnes & Noble
212,476
16,207 (2) Shoppers Food Warehouse, hhgregg, Staples,
Golf Galaxy
- The Home Depot
- Weis Markets
- Regal Cinemas
- Best Buy
16,207
8,615 (2) Wal-Mart
5,942 (2) Wal-Mart
- Kohl's (3)
- PetSmart
- Best Buy
14,557
19,876 Pottery Barn, CineBistro, Brooks Brothers,
Williams Sonoma, Lifestyle Family Fitness
- Nordstrom Rack
19,876
ITEM 2.
PROPERTIES - Continued
%
%
Ownership
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
In Service
Under Development
Total
Property
Owned by
Company
Owned By
Tenant
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
Property
RETAIL (Continued):
Connecticut:
Newington
Waterbury
Total Connecticut
Michigan:
Roseville
Battle Creek
100.0 %
100.0 % $
14.45
188,000
43,000
100.0 %
100.0 %
15.01
148,000
143,000
336,000
186,000
145,000
5,000
150,000
100.0 %
100.0 %
5.37
119,000
119,000
100.0 %
-
-
47,000
47,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
11,657 (2) Wal-Mart, Staples
14,501 (2) ShopRite
26,158
- JCPenney
-
- PetSmart
-
- BJ's Wholesale Club
- Best Buy
-
- Forman Mills
- RVI
- Best Buy
-
- Best Buy
- Home Zone
-
-
- Best Buy
- Best Buy
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Midland (ground leased through 2043)
100.0 %
83.6 %
8.97
31,000
31,000
Total Michigan
Virginia:
Norfolk
(ground and building leased through 2069)
Tyson's Corner
(ground and building leased through 2035)
Total Virginia
Illinois:
Lansing
Arlington Heights
(ground and building leased through 2043)
Chicago
(ground and building leased through 2051)
Total Illinois
Texas:
San Antonio
(ground and building leased through 2041)
197,000
197,000
100.0 %
100.0 %
6.44
114,000
114,000
100.0 %
100.0 %
39.13
38,000
38,000
152,000
152,000
100.0 %
100.0 %
10.00
47,000
47,000
100.0 %
100.0 %
9.00
46,000
46,000
100.0 %
100.0 %
12.03
41,000
41,000
100.0 %
100.0 %
10.63
43,000
43,000
134,000
134,000
Texarkana (ground leased through 2043)
100.0 %
100.0 %
4.39
31,000
31,000
Total Texas
Ohio:
Springdale
(ground and building leased through 2046)
Tennessee:
Antioch
South Carolina:
Charleston
(ground leased through 2063)
100.0 %
-
-
47,000
47,000
74,000
74,000
100.0 %
100.0 %
7.66
45,000
45,000
100.0 %
80.1 %
14.04
45,000
45,000
34
ITEM 2.
PROPERTIES - Continued
%
%
Ownership
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
In Service
Under Development
Total
Property
Owned by
Company
Owned By
Tenant
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
100.0 %
100.0 % $
7.61
43,000
43,000
-
-
$
- PetSmart
100.0 %
100.0 %
32.84
42,000
42,000
-
100.0 %
100.0 %
-
37,000
-
37,000
100.0 %
100.0 %
7.66
32,000
32,000
100.0 %
100.0 %
9.90
31,000
31,000
100.0 %
100.0 %
San Bernadino (1522 East Highland Avenue)
100.0 %
100.0 %
Riverside (5571 Mission Boulevard)
100.0 %
100.0 %
Mojave (ground leased through 2079)
100.0 %
100.0 %
Corona (ground leased through 2079)
100.0 %
100.0 %
4.44
7.23
4.97
6.55
7.76
4.13
7.15
73,000
73,000
40,000
40,000
39,000
39,000
34,000
34,000
33,000
33,000
31,000
31,000
30,000
30,000
6.74
5.61
5.74
30,000
30,000
29,000
29,000
29,000
29,000
398,000
398,000
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
San Bernadino (648 West 4th Street)
100.0 %
100.0 %
100.0 %
-
-
30,000
30,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- Barnes & Noble, Barneys
- Babies "R" Us
- Best Buy
- PetSmart
- Stater Brothers
- Stater Brothers
- Stater Brothers
- Stater Brothers
- Stater Brothers
- Stater Brothers
- Stater Brothers
-
- Stater Brothers
- Stater Brothers
- Stater Brothers
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Property
RETAIL (Continued):
Wisconsin:
Fond Du Lac
(ground leased through 2073)
Washington, DC
3040 M Street
New Hampshire:
Salem (ground leased through 2102)
Kentucky:
Owensboro
(ground and building leased through 2046)
Iowa:
Dubuque
(ground leased through 2043)
CALIFORNIA SUPERMARKETS
Colton (1904 North Rancho Avenue)
Yucaipa
Barstow
Moreno Valley
Desert Hot Springs
Rialto
Total California Supermarkets
Total Strip Shopping Centers
Vornado's Ownership Interest
REGIONAL MALLS:
Green Acres Mall, Valley Stream, NY
(10% ground and building leased
through 2039)
93.0 % $
16.52
18,039,000
12,555,000
93.1 % $
16.50
17,456,000
12,489,000
4,375,000
3,858,000
1,109,000
1,109,000
$
$
1,048,291
1,043,323
100.0 %
90.6 % $
43.01 (5)
1,830,000
1,716,000
114,000
-
$
325,045 Macy's, Sears, Wal-Mart, JCPenney, Best Buy,
BJ's Wholesale Club, Kohl's, Raymour & Flanigan
Monmouth Mall, Eatontown, NJ
50.0 %
92.7 %
35.73 (5)
1,472,000 (4)
860,000
612,000 (4)
-
173,938 Macy's (4), JCPenney (4), Lord & Taylor, Boscov's,
Loews Theatre, Barnes & Noble
35
ITEM 2.
PROPERTIES - Continued
Property
RETAIL (Continued):
Springfield Mall, Springfield, VA
%
%
Ownership
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
In Service
Under Development
Total
Property
Owned by
Company
Owned By
Tenant
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
97.5 %
100.0 % $
21.94 (5)
1,408,000 (4)
514,000
390,000 (4)
504,000
$
- Macy's, JCPenney (4), Target (4)
Broadway Mall, Hicksville, NY
100.0 %
88.4 %
31.56 (5)
1,135,000 (4)
759,000
376,000 (4)
-
87,750 Macy's, IKEA, Target (4), National Amusement
Bergen Town Center - West, Paramus, NJ
100.0 %
95.8 %
44.63 (5)
921,000
888,000
13,000
20,000
283,590 Target, Century 21, Whole Foods Market, Marshalls,
Nordstrom Rack, Saks Off 5th, Bloomingdale's Outlet,
Nike Factory Store, Old Navy,
Neiman Marcus Last Call Studio, Blink Fitness
Montehiedra, Puerto Rico
100.0 %
91.5 %
42.81 (5)
541,000
541,000
-
Las Catalinas, Puerto Rico
100.0 %
88.2 %
57.04 (5)
495,000 (4)
356,000
139,000 (4)
-
-
120,000 The Home Depot, Kmart, Marshalls,
Caribbean Theatres, Tiendas Capri
55,912 Kmart, Sears (4)
92.1 % $
38.52
7,802,000
5,634,000
92.0 % $
38.91
6,142,000
5,191,000
1,644,000
440,000
524,000
511,000
Total Regional Malls
Vornado's Ownership Interest
MANHATTAN STREET RETAIL
Manhattan Mall
4 Union Square South
1540 Broadway
478-486 Broadway
510 5th Avenue
155 Spring Street
435 Seventh Avenue
692 Broadway
1135 Third Avenue
100.0 %
99.4 % $
87.15
243,000
243,000
100.0 %
100.0 %
55.15
203,000
203,000
100.0 %
100.0 %
116.77
161,000
161,000
100.0 %
100.0 %
103.46
85,000
85,000
100.0 %
90.7 %
108.48
59,000
59,000
100.0 %
88.9 %
78.43
47,000
47,000
100.0 %
100.0 %
180.19
43,000
43,000
100.0 %
43.4 %
43.33
35,000
35,000
100.0 %
100.0 %
98.43
25,000
25,000
715 Lexington (ground leased through 2041)
100.0 %
100.0 %
167.69
23,000
23,000
7 West 34th Street
828-850 Madison Avenue
484 Eighth Avenue
40 East 66th Street
431 Seventh Avenue
677-679 Madison Avenue
148 Spring Street
100.0 %
100.0 %
203.75
21,000
21,000
100.0 %
100.0 %
333.47
18,000
18,000
100.0 %
100.0 %
89.88
14,000
14,000
100.0 %
100.0 %
397.02
12,000
12,000
100.0 %
75.0 %
49.38
10,000
10,000
100.0 %
100.0 %
356.83
100.0 %
100.0 %
89.79
8,000
7,000
8,000
7,000
36
$
$
$
1,046,235
959,265
72,639 JCPenney, Charlotte Russe, Aeropostale, Express,
Victoria's Secret
75,000 Whole Foods Market, DSW (6), Forever 21
- Forever 21, Planet Hollywood, Disney, Swarovski,
MAC Cosmetics
- Top Shop, Madewell, J. Crew
31,732 Joe Fresh
- Sigrid Olsen
51,353 Hennes & Mauritz
- Equinox
- GAP
- New York & Company, Zales
- Express
80,000 Gucci, Chloe, Cartier
- T.G.I. Friday's
- Dennis Basso, Nespresso USA, J. Crew
-
- Anne Fontaine
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
ITEM 2.
PROPERTIES - Continued
Property
RETAIL (Continued):
150 Spring Street
488 8th Avenue
968 Third Avenue
825 Seventh Avenue
Total Manhattan Street Retail
Vornado's Ownership Interest
Total Retail Space
Vornado's Ownership Interest
%
%
Ownership
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
In Service
Under Development
Total
Property
Owned by
Company
Owned By
Tenant
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
100.0 %
100.0 % $
123.90
100.0 %
100.0 %
60.85
50.0 %
100.0 %
175.81
100.0 %
100.0 %
181.55
7,000
6,000
6,000
4,000
7,000
6,000
6,000
4,000
96.7 % $
106.28
1,037,000
1,037,000
96.7 % $
106.06
1,034,000
1,034,000
-
-
-
-
-
-
-
-
-
-
-
-
92.9 %
93.0 %
26,878,000
19,226,000
6,019,000
24,632,000
18,714,000
4,298,000
1,633,000
1,620,000
$
$
$
$
$
- Puma
-
- ING Bank
- Lindy's
310,724
310,724
2,405,250
2,313,312
* We do not capitalize interest or real estate taxes on this space.
(1) Weighted Average Annual Rent PSF excludes ground rent, storage rent and garages.
(2) These encumbrances are cross-collateralized under a blanket mortgage in the amount of $645,398 as of December 31, 2011.
(3) The lease for this former Bradlees location is guaranteed by Stop and Shop (70% as to Totowa).
(4) Includes square footage of anchors who own the land and building.
(5) Weighted Average Annual Rent PSF shown is for mall tenants only.
(6) An affiliate of DSW is liable for the former Filene's lease pursuant to a guaranty that is currently in dispute.
37
ITEM 2.
PROPERTIES - Continued
Property
MERCHANDISE MART:
Illinois:
Merchandise Mart, Chicago
Other
Total Illinois
California
L.A. Mart
Massachusetts
Boston Design Center
(ground leased through 2060)
New York
7 West 34th Street
Washington, DC
Washington Design Center
Total Merchandise Mart
Vornado's Ownership Interest
%
%
Ownership
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
100.0 %
90.3 % $
30.46
3,493,000
3,493,000
-
$
550,000 American Intercontinental University (AIU),
50.0 %
93.9 %
90.3 %
32.96
19,000
19,000
30.48
3,512,000
3,512,000
100.0 %
71.5 %
20.97
784,000
784,000
100.0 %
78.8 %
30.10
554,000
554,000
100.0 %
86.5 %
39.49
419,000
419,000
100.0 %
75.1 %
34.40
393,000
393,000
85.2 % $
30.17
5,662,000
5,662,000
85.2 % $
30.17
5,653,000
5,653,000
-
-
-
-
-
-
-
-
Baker, Knapp & Tubbs, Royal Bank of Canada,
CCC Information Services, Ogilvy Group (WPP),
Chicago Teachers Union,
Office of the Special Deputy Receiver, Publicis Groupe,
Bankers Life & Casualty, Holly Hunt Ltd.,
Merchandise Mart Headquarters, Steelcase,
Chicago School of Professional Psychology,
Razorfish
24,155
574,155
- County of L.A. - Dept of Children & Family Services
67,350 Boston Brewing, Fitch Puma
- Kurt Adler
- General Services Administration
$
$
641,505
629,427
(1) Weighted Average Annual Rent PSF excludes ground rent, storage rent and garages.
38
ITEM 2.
PROPERTIES - Continued
Property
555 CALIFORNIA STREET:
555 California Street
315 Montgomery Street
345 Montgomery Street
Total 555 California Street
Vornado's Ownership Interest
%
%
Ownership
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
70.0 %
91.7 % $
54.67
1,503,000
1,503,000
-
$
600,000 Bank of America, Dodge & Cox,
70.0 %
70.0 %
100.0 %
100.0 %
41.14
93.22
228,000
228,000
64,000
64,000
93.1 % $
54.40
1,795,000
1,795,000
93.1 % $
54.40
1,257,000
1,257,000
-
-
-
-
Goldman Sachs & Co., Jones Day,
Kirkland & Ellis LLP, Morgan Stanley & Co. Inc.,
McKinsey & Company Inc., UBS Financial Services
- Bank of America
- Bank of America
$
$
600,000
420,000
(1) Weighted Average Annual Rent PSF excludes ground rent, storage rent and garages.
39
ITEM 2.
PROPERTIES - Continued
Property
WAREHOUSES:
NEW JERSEY
East Hanover - Five Buildings
%
%
Ownership
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
100.0 %
45.3 % $
4.85
942,000
942,000
-
$
- Foremost Groups Inc., Fidelity Paper & Supply Inc.,
Givaudan Flavors Corp., Gardner Industries
Edison
100.0 %
-
-
272,000
272,000
Total Warehouses
Vornado's Ownership Interest
35.2 % $
4.85
1,214,000
1,214,000
35.2 % $
4.85
1,214,000
1,214,000
-
-
-
$
$
-
-
-
(1) Weighted Average Annual Rent PSF excludes ground rent, storage rent and garages.
40
ITEM 2.
PROPERTIES - Continued
%
%
Ownership
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
In Service
Under Development
Total
Property
Owned by
Company
Owned By
Tenant
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
Property
ALEXANDER'S INC.:
New York:
731 Lexington Avenue, Manhattan
Office
Retail
Rego Park II (adjacent to Rego Park I),
Queens (6.6 acres)
Flushing, Queens(3) (1.0 acre)
New Jersey:
Paramus, New Jersey
(30.3 acres ground leased to IKEA
through 2041)
Property to be Developed:
Rego Park III (adjacent to Rego Park II),
Queens, NY (3.4 acres)
Total Alexander's
Vornado's Ownership Interest
Kings Plaza Regional Shopping Center,
Brooklyn (24.3 acres)
32.4 %
95.6 %
39.35
1,210,000
871,000
339,000 (2)
Rego Park I, Queens (4.8 acres)
32.4 %
100.0 %
36.15
343,000
343,000
32.4 %
100.0 % $
84.97
885,000
885,000
32.4 %
100.0 %
161.22
174,000
174,000
1,059,000
1,059,000
-
-
-
32.4 %
95.3 %
39.26
610,000
610,000
32.4 %
100.0 %
14.99
167,000
167,000
32.4 %
100.0 %
-
-
-
32.4 %
-
-
-
-
-
-
-
-
-
97.8 % $
57.83
3,389,000
3,050,000
97.8 % $
57.83
1,098,000
988,000
339,000
110,000
-
-
-
-
-
-
-
-
-
-
-
$
339,890 Bloomberg
320,000 Hennes & Mauritz, The Home Depot,
The Container Store
659,890
250,000 Sears, Lowe's (ground lessee), Macy's (2),
Best Buy
78,246 Sears, Burlington Coat Factory,
Bed Bath & Beyond, Marshalls
274,796 Century 21, Costco, Kohl's, TJ Maxx,
Toys "R" Us
- New World Mall LLC
68,000 IKEA (ground lessee)
-
$
$
1,330,932
431,222
(1) Weighted Average Annual Rent PSF excludes ground rent, storage rent and garages.
(2) Owned by Macy's, Inc.
(3) Leased by Alexander's through January 2037.
41
ITEM 2.
PROPERTIES - Continued
Fund
Ownership %
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
64.7 %
95.2 % $
42.59
932,000
932,000
-
$
250,000 New York University, Coty Inc.,
Public Service Mutual Insurance
- Residential
100.0 %
100.0 %
-
51,000
146,000
51,000
146,000
100.0 %
100.0 %
123.85
95,000
95,000
100.0 %
100.0 %
585.15
5,000
5,000
38.0 %
38.0 %
100.0 %
100.0 %
155.00
35.00
42.55
14,000
212,000
226,000
14,000
212,000
226,000
-
-
-
-
-
-
-
Barnes & Noble, Hennes & Mauritz,
Sephora, Bank of America
100,000
27,790 Malo, Joseph Inc.
Hershey's
American Management Association
258,750
50.0 %
100.0 %
27.10
313,000
238,000
75,000 *
34,000 Washington Sports, Dean & Deluca, Anthropologie,
Hennes & Mauritz, J. Crew
Property
VORNADO CAPITAL PARTNERS
REAL ESTATE FUND:
Manhattan:
One Park Avenue Office Building
Lucida, 86th Street and Lexington Avenue
(ground leased through 2082)
- Retail
11 East 68th Street Retail
Crowne Plaza Times Square
- Hotel (795 Keys)
- Retail
- Office
Washington, DC:
Georgetown Park Retail Shopping Center
Total Real Estate Fund
Vornado's Ownership Interest
62.0 %
97.0 %
15.5 %
97.0 %
1,622,000
1,547,000
249,000
240,000
75,000
9,000
$
$
670,540
88,764
* We do not capitalize interest or real estate taxes on this space.
(1) Weighted Average Annual Rent PSF excludes ground rent, storage rent and garages.
42
NEW YORK OFFICE PROPERTIES
As of December 31, 2011, our portfolio consisted of 30 office properties in Midtown Manhattan aggregating 20.8 million square
feet, of which we own 17.5 million square feet, comprised of 16.2 million square feet of office space, 1.2 million square feet of retail
space and 183,000 square feet of showroom space. In addition, we own 1.0 million square feet of retail space in New York City that is
not part of our office buildings and is included in our Retail Properties segment. The New York Office Properties segment also
includes 7 garages totaling 385,000 square feet (1,829 spaces) which are managed by, or leased to, third parties. The garage space is
excluded from the statistics provided in this section.
Occupancy and weighted average annual rent per square foot:
As of December 31,
2011
2010
2009
2008
2007
Rentable
Square Feet
17,546,000
16,194,000
16,173,000
16,108,000
15,994,000
Occupancy
Rate
95.6 %
95.6 %
95.5 %
96.7 %
97.6 %
$
Weighted
Average Annual
Rent PSF
58.70
55.45
55.00
53.08
49.34
2011 New York Office Properties rental revenue by tenants’ industry:
Industry
Finance
Retail
Legal Services
Banking
Communications
Insurance
Technology
Publishing
Government
Real Estate
Advertising
Pharmaceutical
Not-for-Profit
Engineering
Service Contractors
Health Services
Other
Percentage
16 %
15 %
9 %
7 %
5 %
5 %
5 %
4 %
4 %
4 %
3 %
3 %
2 %
2 %
1 %
1 %
14 %
100 %
New York Office Properties lease terms generally range from five to seven years for smaller tenants to as long as 15 years for
major tenants, and may provide for extension options at market rates. Leases typically provide for periodic step-ups in rent over the
term of the lease and pass through to tenants their share of increases in real estate taxes and operating expenses over a base year.
Electricity is provided to tenants on a sub-metered basis or included in rent based on surveys and adjusted for subsequent utility rate
increases. Leases also typically provide for free rent and tenant improvement allowances for all or a portion of the tenant’s initial
construction costs of its premises.
43
NEW YORK OFFICE PROPERTIES – CONTINUED
Tenants accounting for 2% or more of 2011 New York Office Properties total revenues:
Tenant
Macy’s
Ziff Brothers Investments, Inc.
McGraw-Hill Companies, Inc.
Limited Brands
Square Feet
Leased
2011
Revenues
$
537,000
287,000
480,000
368,000
29,895,000
23,703,000
23,673,000
23,463,000
Percentage of
New York Office
Properties
Revenues
2.7 %
2.1 %
2.1 %
2.1 %
Percentage
of Total
Company
Revenues
1.0 %
0.8 %
0.8 %
0.8 %
2011 New York Office Properties Leasing Activity:
Location
1290 Avenue of Americas
One Park Avenue
One Penn Plaza
330 Madison Avenue
330 West 34th Street
770 Broadway
888 Seventh Avenue
Two Penn Plaza
Eleven Penn Plaza
1740 Broadway
595 Madison Avenue
280 Park Avenue
150 East 58th Street
909 Third Avenue
40 Fulton Street
350 Park Avenue
90 Park Avenue
640 Fifth Avenue
57th Street
866 United Nations Plaza
40-42 Thompson Street
20 Broad Street
100 West 33rd Street
Total
Weighted Average
Square
Feet
521,000
493,000
426,000
311,000
302,000
235,000
167,000
130,000
106,000
105,000
95,000
67,000
42,000
39,000
32,000
26,000
25,000
24,000
24,000
15,000
12,000
11,000
3,000
3,211,000
$
Initial Rent Per
Square Foot (1)
66.98
42.12
51.46
66.41
32.74
55.00
78.91
48.41
46.73
60.39
65.56
105.05
52.45
56.57
33.10
90.00
55.81
85.98
31.17
52.43
50.00
31.68
41.00
55.73
Vornado's share
2,432,000
55.37
(1) Represents the cash basis weighted average starting rents per square foot, which is generally indicative of market rents. Most leases include free rent and
periodic step-ups in rent, which are not included in the initial cash basis rent per square foot leased, but are included in the GAAP basis straight-line rent per
square foot (see "Overview - Leasing Activity" of Management's Discussion and Analysis of Financial Condition and Results of Operations).
In addition to the office space noted above, during 2011 we leased 9,000 square feet of retail space contained in office buildings
at an average initial rent of $184.78 per square foot, a 60.2% increase over the prior weighted average rent per square foot.
44
NEW YORK OFFICE PROPERTIES – CONTINUED
Lease expirations as of December 31, 2011, assuming none of the tenants exercise renewal options:
Office Space:
Year
Office Space:
Month to month
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Retail Space:
(contained in office buildings)
Month to month
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Number of
Square Feet of
Expiring Leases Expiring Leases
Percentage of
New York
Office Properties
Square Feet
Weighted Average Annual
Rent of Expiring Leases
Total
Per Square Foot
62
83
74
112
103
77
61
45
37
29
30
5
6
16
12
11
7
3
8
7
7
7
143,000
999,000
766,000 (1)
1,182,000
2,195,000
1,109,000
1,455,000
965,000
908,000
1,427,000
955,000
16,000
30,000
50,000
102,000
47,000
181,000
154,000
116,000
33,000
22,000
34,000
0.8 %
5.8 %
4.4 %
6.8 %
12.6 %
6.4 %
8.4 %
5.6 %
5.2 %
8.2 %
5.5 %
0.1 %
0.2 %
0.3 %
0.6 %
0.3 %
1.1 %
0.9 %
0.7 %
0.2 %
0.1 %
0.2 %
$
$
4,783,000 $
61,528,000
41,402,000
72,632,000
119,339,000
66,663,000
75,768,000
64,689,000
55,008,000
75,347,000
55,460,000
824,000 $
4,298,000
8,564,000
20,977,000
18,140,000
13,933,000
7,545,000
14,257,000
8,537,000
3,021,000
5,753,000
33.45
61.59
54.05
61.45
54.37
60.11
52.07
67.04
60.58
52.80
58.07
51.50
143.27
171.28
205.66
385.96
76.98
48.99
122.91
258.70
137.32
169.21
_______________________________
(1)
Excludes 492,000 square feet at 909 Third Avenue leased to the U.S. Post Office through 2038 (including five 5-year renewal options) for
which the annual escalated rent is $11.23 per square foot.
45
WASHINGTON, DC OFFICE PROPERTIES
As of December 31, 2011, our portfolio consisted of 77 properties aggregating 20.5 million square feet, of which we own 17.9
million square feet, comprised of 63 office buildings, seven residential properties, a hotel property and 20.8 acres of undeveloped land.
In addition, the Washington, DC Office Properties segment includes 59 garages totaling approximately 9.6 million square feet (31,679
spaces) which are managed by or leased to third parties. The garage space is excluded from the statistics provided in this section.
As of December 31, 2011, 29% of the space in our Washington, DC Office Properties segment was leased to various agencies of
the U.S. Government.
Occupancy and weighted average annual rent per square foot:
As of December 31,
2011
2010
2009
2008
2007
Rentable
Square Feet
17,925,000
17,823,000
17,646,000
16,981,000
16,715,000
Occupancy
Rate
90.0 %
94.3 %
93.3 %
94.1 %
94.0 %
$
Weighted
Average Annual
Rent PSF
40.63
39.42
38.37
37.03
34.47
2011 Washington, DC Office Properties rental revenue by tenants’ industry:
Industry
U.S. Government
Government Contractors
Membership Organizations
Legal Services
Manufacturing
Business Services
Real Estate
Computer and Data Processing
Television Broadcasting
Health Services
Communication
Education
Food
Other
Percentage
38 %
25 %
6 %
5 %
3 %
3 %
2 %
2 %
1 %
1 %
1 %
1 %
1 %
11 %
100 %
Washington, DC Office Properties lease terms generally range from five to seven years, and may provide for extension options at
either pre-negotiated or market rates. Leases typically provide for periodic step-ups in rent over the term of the lease and pass through
to tenants, the tenants’ share of increases in real estate taxes and certain property operating expenses over a base year. Periodic step-
ups in rent are usually based upon either fixed percentage increases or the consumer price index. Leases also typically provide for free
rent and tenant improvement allowances for all or a portion of the tenant’s initial construction costs of its premises.
Tenants accounting for 2% or more of Washington, DC Office Properties total revenues:
Tenant
U.S. Government
Family Health International
Boeing
Lockheed Martin
Square Feet
Leased
6,054,000
430,000
378,000
478,000
$
2011
Revenues
208,812,000
18,072,000
16,545,000
14,028,000
Percentage of
Washington, DC
Office Properties
Revenues
33.0 %
2.9 %
2.6 %
2.2 %
Percentage
of Total
Company
Revenues
7.2 %
0.6 %
0.6 %
0.5 %
46
WASHINGTON, DC OFFICE PROPERTIES – CONTINUED
2011 Washington, DC Office Properties Leasing Activity:
Location
409 3rd Street, NW
Skyline Place / One Skyline Tower
S. Clark Street / 12th Street
1750 Pennsylvania Avenue, NW
1550-1750 Crystal Drive / 241-251 18th Street
2011-2451 Crystal Drive
Commerce Executive
1800, 1851 and 1901 South Bell Street
2200 / 2300 Clarendon Blvd (Courthouse Plaza)
1150 17th Street, NW
2001 Jefferson Davis Highway and 223 23rd Street / 2221 South
Clark Street
Reston Executive
Universal Buildings (1825 - 1875 Connecticut Avenue, NW)
2101 L Street, NW
1726 M Street, NW
1399 New York Avenue, NW
1730 M Street, NW
Bowen Building - 875 15th Street, NW
Democracy Plaza One
Partially Owned Entities
Total
Vornado's share
Weighted Average
Square
Feet
268,000
235,000
121,000
120,000
117,000
97,000
84,000
84,000
78,000
77,000
66,000
49,000
41,000
17,000
17,000
12,000
9,000
4,000
3,000
285,000
1,784,000
1,606,000
$
Initial Rent Per
Square Foot (1)
44.97
35.61
43.47
46.92
42.79
42.61
30.25
42.87
42.09
46.01
34.43
29.84
43.63
54.55
39.59
81.00
44.60
65.20
32.00
36.14
40.69
40.99
____________________
(1) Represents the cash basis weighted average starting rents per square foot, which is generally indicative of market rents. Most leases include free rent and
periodic step-ups in rent, which are not included in the initial cash basis rent per square foot leased, but are included in the GAAP basis straight-line rent per
square foot (see "Overview - Leasing Activity" of Management's Discussion and Analysis of Financial Condition and Results of Operations).
47
WASHINGTON, DC OFFICE PROPERTIES – CONTINUED
Lease expirations as of December 31, 2011, assuming none of the tenants exercise renewal options:
Percentage of
Washington, DC
Square Feet of Office Properties
Number of
Year
Month to month
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Expiring Leases Expiring Leases
273,000
2,902,000 (1)
1,100,000
1,545,000
1,447,000
1,143,000
428,000
792,000
1,066,000
720,000
836,000
43
267
152
140
126
90
42
48
41
28
18
Square Feet
2.2 %
22.9 %
8.7 %
12.2 %
11.4 %
9.0 %
3.4 %
6.3 %
8.4 %
5.7 %
6.6 %
$
Weighted Average Annual
Rent of Expiring Leases
Total
10,920,000 $
116,883,000
43,693,000
58,793,000
57,264,000
47,203,000
15,529,000
32,246,000
42,851,000
35,186,000
34,728,000
Per Square Foot
40.00
40.28
39.74
38.04
39.59
41.30
36.26
40.70
40.20
48.86
41.54
(1) Includes 1,140,000 square feet related to the Base Realignment and Closure statute (see below).
Base Realignment and Closure (“BRAC”)
Our Washington, DC Office Properties segment (as well as other landlords who lease space to the Department of Defense
(“DOD”)) is subject to the BRAC statute, which requires the DOD to relocate from 2,395,000 square feet in our buildings in the
Northern Virginia area to government owned military bases. The table below summarizes the effect of BRAC on our Washington, DC
Office Properties segment for square feet leased by the DOD. See page 76 for the estimated impact on 2012 EBITDA.
Annual
Expiring
Escalated
Rent Per
Square Foot
Total
Square Feet
Crystal City Skyline
Rosslyn
Square feet to be relet by the General Services
Administration (leases pending)
$
40.05
313,000
313,000
-
Square feet already vacated
26.57
403,000
-
403,000
-
-
Square feet expiring in the future:
First Quarter 2012
Second Quarter 2012
Third Quarter 2012
Total 2012
2013
2014
2015
40.10
39.60
41.47
36.85
32.76
40.09
589,000
171,000
380,000
1,140,000
183,000
330,000
26,000
551,000
171,000
251,000
973,000
38,000
-
119,000
157,000
-
-
10,000
10,000
-
128,000
20,000
43,000
202,000
6,000
140,000
-
-
Total square feet expiring in the future
1,679,000
1,121,000
408,000
150,000
Total square feet subject to BRAC
2,395,000
1,434,000
811,000
150,000
In February 2012, we notified the lender that the Skyline property currently has a 26% vacancy rate, which is expected to increase
due to scheduled lease expirations resulting primarily from the BRAC statute. Based on the projected vacancy and the significant
amount of capital, time and effort to re-tenant the property, we requested that the mortgage loan be placed with the special servicer.
48
RETAIL PROPERTIES
As of December 31, 2011, our portfolio consisted of 155 retail properties, of which 127 are strip shopping centers and single
tenant retail assets located primarily in the Northeast, Mid-Atlantic and California; seven are regional malls located in New York,
New Jersey, Virginia and San Juan, Puerto Rico; and 21 are retail properties located in Manhattan (“Manhattan Street Retail”). Our
strip shopping centers and malls are generally located on major highways in mature, densely populated areas, and therefore attract
consumers from a regional, rather than a neighborhood market place.
Strip Shopping Centers
Our strip shopping centers contain an aggregate of 16.9 million square feet, of which we own 16.3 million square feet. These
properties are substantially (approximately 80%) leased to large stores (over 20,000 square feet). Tenants include destination retailers
such as discount department stores, supermarkets, home improvement stores, discount apparel stores and membership warehouse
clubs. Tenants typically offer basic consumer necessities such as food, health and beauty aids, moderately priced clothing, building
materials and home improvement supplies, and compete primarily on the basis of price and location.
Regional Malls
The Green Acres Mall in Valley Stream, Long Island, New York contains 1.8 million square feet, and is anchored by Macy’s,
Sears, Wal-Mart, Kohl’s, JC Penney, Best Buy and BJ’s Wholesale Club.
The Monmouth Mall in Eatontown, New Jersey, in which we own a 50% interest, contains 1.5 million square feet and is anchored
by Macy’s, Lord & Taylor, JC Penney and Boscov’s, three of which own their stores aggregating 612,000 square feet.
The Springfield Mall in Springfield, Virginia, contains 1.4 million square feet and is anchored by Macy’s, JC Penney and Target,
two of which own their stores aggregating 390,000 square feet. We plan a complete renovation of the mall beginning in 2012.
The Bergen Town Center in Paramus, New Jersey contains 921,000 square feet and is anchored by Century 21, Whole Foods and
Target.
The Broadway Mall in Hicksville, Long Island, New York contains 1.1 million square feet and is anchored by Macy’s, Ikea,
National Amusements and Target, two of which own their stores aggregating 376,000 square feet.
The Montehiedra Mall in San Juan, Puerto Rico contains 541,000 square feet and is anchored by Home Depot, Kmart, and
Marshalls.
The Las Catalinas Mall in San Juan, Puerto Rico, contains 495,000 square feet and is anchored by Kmart and Sears, which owns
its 139,000 square foot store.
Manhattan Street Retail
Manhattan Street Retail is comprised of 2.2 million square feet in 46 properties, of which 1.0 million square feet in 21 properties
is in our Retail Properties segment and 1.2 million square feet in 25 properties is in our New York Office Properties segment.
Manhattan Street Retail includes (i) properties on Fifth Avenue, Madison Avenue and in SoHo, occupied by retailers such as Hennes
& Mauritz (Flagship), Coach (Flagship), Top Shop (Flagship), Madewell, Gucci, Chloe and Cartier; (ii) 1540 Broadway in Times
Square which contains 161,000 square feet, anchored by Forever 21 (Flagship) and Disney (Flagship); (iii) 510 Fifth Avenue which
contains 59,000 square feet, anchored by Joe Fresh; (iv) 4 Union Square South which contains 203,000 square feet, anchored by
Whole Foods Market, Forever 21 and DSW; and (v) properties in the Penn Plaza district, such as the Manhattan Mall which contains
243,000 square feet, anchored by JC Penney.
49
RETAIL PROPERTIES – CONTINUED
Occupancy and weighted average annual rent per square foot:
As of December 31, 2011, the aggregate occupancy rate for the entire Retail Properties segment of 25.2 million square feet was
92.9%. Details of our ownership interest in the strip shopping centers, regional malls and Manhattan Street retail for the past five
years are provided below.
Strip Shopping Centers:
As of December 31,
2011
2010
2009
2008
2007
Rentable
Square Feet
16,347,000
16,866,000
16,107,000
15,755,000
15,463,000
Occupancy
Rate
93.1 %
92.1 %
91.5 %
91.9 %
94.1 %
$
Weighted Average
Annual Net Rent
per Square Foot
16.50
15.68
15.30
14.52
14.12
Regional Malls:
As of December 31,
2011
2010
2009
2008
2007
Rentable
Square Feet
5,631,000
5,480,000
5,439,000
5,232,000
5,528,000
Occupancy
Rate
92.0 % $
92.2 %
91.1 %
93.0 %
96.1 %
Weighted Average Annual
Net Rent Per Square Foot
Mall and
Anchor
Tenants
Mall
Tenants
38.91
$
39.73
39.56
37.59
34.94
20.99
21.47
20.67
20.38
19.11
For the years ending December 31, 2011 and 2010, mall store sales per square foot for in-line stores with less than 10,000 square
feet, including partially owned malls, were $467.00 and $463.00, respectively.
Manhattan Street Retail:
As of December 31,
2011
2010
2009
2008
2007
Rentable
Square Feet
1,034,000
1,107,000
1,007,000
874,000
943,000
Occupancy
Rate
96.7 %
95.3 %
95.3 %
90.4 %
86.8 %
Weighted Average
Annual Net Rent
per Square Foot
106.06
$
99.95
96.37
97.18
89.86
The table above excludes 1.2 million square feet of retail space at the bases of certain of our New York Office buildings that
is in our New York Office Properties segment. In total, we have 2.2 million square feet of street retail in Manhattan.
50
RETAIL PROPERTIES – CONTINUED
2011 Retail Properties rental revenue by type of retailer
Industry
Discount Stores
Family Apparel
Women's Apparel
Supermarkets
Home Improvement
Restaurants
Department Stores
Home Entertainment and Electronics
Personal Services
Banking and Other Business Services
Home Furnishings
Jewelry
Membership Warehouse Clubs
Other
Percentage
13 %
11 %
9 %
8 %
7 %
6 %
5 %
5 %
4 %
4 %
3 %
2 %
2 %
21 %
100 %
Retail Properties lease terms generally range from five years or less in some instances for smaller tenants to as long as 25 years
for major tenants. Leases generally provide for reimbursements of real estate taxes, insurance and common area maintenance charges
(including roof and structure in strip shopping centers, unless it is the tenant’s direct responsibility), and percentage rents based on
tenant sales volume. Percentage rents accounted for less than 1% of the Retail Properties total revenues during 2011.
Tenants accounting for 2% or more of 2011 Retail Properties total revenues:
Tenant
The Home Depot
Wal-Mart
Forever 21
Best Buy
JCPenney
Stop & Shop / Koninklijke Ahold NV
Lowe's
Square Feet
Leased
1,135,000
1,547,000
175,000
664,000
787,000
633,000
976,000
$
2011
Revenues
23,448,000
21,158,000
19,400,000
17,821,000
15,425,000
14,955,000
12,698,000
Percentage of
Retail Properties
Revenues
3.8 %
3.4 %
3.1 %
2.9 %
2.5 %
2.4 %
2.0 %
Percentage of
Total Company
Revenues
0.8%
0.7%
0.7%
0.6%
0.5%
0.5%
0.4%
51
RETAIL PROPERTIES – CONTINUED
2011 Retail Properties Leasing Activity:
Location
Strip Shopping Centers:
Beverly Connection, Los Angeles, CA
Buffalo (Amherst,) NY
Poughkeepsie, NY
Lawnside, NJ
Dover, NJ
Cherry Hill, NJ
Rochester (Henrietta), NY
Staten Island, NY
Middletown, NJ
Kearny, NJ
San Francisco (3700 Geary Boulevard), CA
Bricktown, NJ
Tampa (Hyde Park Village), FL
Bronx (1750-1780 Gun Hill Road), NY
San Jose, CA
Bronx (Bruckner Boulevard), NY
Glen Burnie, MD
Wilkes-Barre, PA
Carlstadt, NJ
Morris Plains, NJ
Other
Regional Malls:
Green Acres Mall, Valley Stream, NY
Monmouth Mall, Eatontown, NJ
Bergen Town Center - West, Paramus, NJ
Broadway Mall, Hicksville, NY
Springfield Mall, Springfield, VA
Las Catalinas, Puerto Rico
Montehiedra, Puerto Rico
Manhattan Street Retail:
510 5th Avenue, NY
Other
Total
Vornado's share
Weighted Average
Initial Rent Per
Square Foot (1)
Square Feet
$
158,000
139,000
118,000
111,000
80,000
78,000
46,000
38,000
31,000
30,000
30,000
29,000
25,000
22,000
17,000
15,000
15,000
12,000
10,000
10,000
95,000
1,109,000
153,000
64,000
53,000
44,000
35,000
22,000
21,000
392,000
19,000
34,000
53,000
1,554,000
1,522,000
31.26
7.90
5.47
13.75
11.06
10.17
5.78
25.45
14.42
15.18
33.00
15.41
23.10
33.91
33.96
53.11
15.00
18.45
19.37
34.89
29.80
18.03
28.76
21.56
45.03
32.43
15.47
53.66
36.91
30.85
200.12
80.73
124.31
24.88
24.95
(1) Represents the cash basis weighted average starting rents per square foot, which is generally indicative of market rents. Most leases include free rent and
periodic step-ups in rent, which are not included in the initial cash basis rent per square foot leased, but are included in the GAAP basis straight-line rent per
square foot (see "Overview - Leasing Activity" of Management's Discussion and Analysis of Financial Condition and Results of Operations).
52
RETAIL PROPERTIES – CONTINUED
Lease expirations as of December 31, 2011, assuming none of the tenants exercise renewal options:
Year
Strip Shopping Centers:
Month to month
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Regional Malls:
Month to month
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Manhattan Street Retail:
Month to month
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Number of
Square Feet of
Expiring Leases Expiring Leases
Percentage of
Retail Properties
Square Feet
Weighted Average Annual
Net Rent of Expiring Leases
Total
Per Square Foot
0.3 %
2.9 %
9.2 %
6.6 %
2.9 %
4.0 %
3.0 %
5.1 %
4.4 %
4.1 %
4.1 %
0.8 %
0.6 %
1.3 %
1.7 %
1.0 %
2.2 %
2.5 %
0.5 %
0.8 %
0.7 %
2.1 %
- %
0.5 %
0.1 %
0.1 %
0.1 %
0.1 %
- %
0.6 %
0.3 %
0.3 %
0.1 %
$
$
$
990,000 $
8,837,000
24,085,000
17,904,000
12,089,000
12,591,000
8,182,000
18,194,000
17,253,000
10,943,000
13,176,000
3,835,000 $
4,685,000
7,861,000
7,041,000
6,991,000
7,571,000
6,085,000
5,093,000
5,833,000
5,374,000
6,166,000
126,000 $
8,223,000
3,499,000
3,954,000
2,581,000
3,883,000
1,470,000
21,134,000
10,224,000
5,321,000
960,000
14.56
14.71
12.61
13.07
20.42
15.39
13.42
17.16
18.85
12.97
15.46
23.55
37.90
29.19
19.73
32.76
16.38
11.89
46.02
35.61
36.43
14.34
37.29
73.42
128.43
140.15
113.51
171.69
154.69
160.75
165.40
79.70
40.00
20
52
104
104
65
72
51
56
43
33
43
56
51
60
49
41
54
37
42
36
32
25
3
20
7
7
6
8
4
16
11
7
1
68,000
601,000
1,911,000
1,369,000
592,000
818,000
610,000
1,060,000
915,000
843,000
852,000
163,000
123,000
269,000
357,000
213,000
462,000
512,000
111,000
164,000
148,000
430,000
3,000
112,000
27,000
28,000
23,000
23,000
10,000
131,000
62,000
67,000
24,000
53
MERCHANDISE MART PROPERTIES
As of December 31, 2011, we own 5 Merchandise Mart Properties containing an aggregate of 5.7 million square feet. The
Merchandise Mart Properties segment also contains 7 garages totaling 914,000 square feet (3,158 spaces). The garage space is
excluded from the statistics provided in this section.
Square feet by location and use as of December 31, 2011:
(Amounts in thousands)
Chicago, Illinois:
Merchandise Mart
Other
Total Chicago, Illinois
Los Angeles, California:
L.A. Mart
Boston, Massachusetts:
Boston Design Center
New York, New York:
7 West 34th Street
Total
Office
Total
Permanent
Temporary
Trade Show
Retail
Showroom
3,493
10
3,503
1,119
-
1,119
2,306
-
2,306
1,804
-
1,804
502
-
502
784
188
596
542
54
554
129
420
420
-
419
10
409
362
47
Washington, DC:
Washington Design Center
Total Merchandise Mart Properties
393
5,653
110
1,556
283
4,014
283
3,411
-
603
Occupancy rate
85.2%
90.5%
83.0%
68
10
78
-
5
-
-
83
92.1%
In November 2011, we entered into an agreement to sell 350 West Mart Center, a 1.2 million square foot office building located
in Chicago, Illinois, for $228,000,000. Accordingly, we have reclassified the results of operations of this property to “income (loss)
from discontinued operations,” and the related assets and liabilities to “assets related to discontinued operations” and “liabilities
related to discontinued operations” for all periods presented in the accompanying consolidated financial statements. On January 6,
2012, we completed the sale of the property, which resulted in a net gain of $54,200,000 that will be recognized in the first quarter of
2012.
54
MERCHANDISE MART PROPERTIES – CONTINUED
Office Space
Occupancy and weighted average annual rent per square foot:
As of December 31,
2011
2010
2009
2008
2007
Rentable
Square Feet
1,556,000
1,448,000
1,296,000
1,286,000
1,250,000
Occupancy Rate
90.5%
91.8%
94.5%
95.1%
96.4%
$
Weighted
Average Annual
Rent PSF
25.52
25.28
22.35
22.66
22.79
2011 Merchandise Mart Properties office rental revenues by tenants’ industry:
Industry
Business Services
Advertising and Marketing
Government
Education
Banking
Insurance
Health Care
Telecommunications
Other
Percentage
25 %
18 %
17 %
14 %
8 %
5 %
3 %
2 %
8 %
100 %
Office lease terms generally range from three to seven years for smaller tenants to as long as 15 years for major tenants. Leases
typically provide for periodic step-ups in rent over the term of the lease and pass through to tenants their share of increases in real
estate taxes and operating expenses over a base year. Electricity is provided to tenants on a sub-metered basis or included in rent and
adjusted for subsequent utility rate increases. Leases also typically provide for tenant improvement allowances for all or a portion of
the tenant’s initial construction of its premises.
Office tenants accounting for 2% or more of Merchandise Mart Properties’ 2011 total revenues
No tenant accounted for more than 2% of the Merchandise Mart Properties revenue in 2011.
55
MERCHANDISE MART PROPERTIES– CONTINUED
2011 leasing activity – Merchandise Mart Properties office space:
Merchandise Mart, Chicago
Washington Design Center
Total
Weighted Average
Initial Rent Per
Square Foot (1)
26.43
46.02
27.61
$
Square Feet
241,000
16,000
257,000
(1) Represents the cash basis weighted average starting rents per square foot, which is generally indicative of market
rents. Most leases include free rent and periodic step-ups in rent, which are not included in the initial cash basis rent
per square foot leased, but are included in the GAAP basis straight-line rent per square foot (see "Overview - Leasing
Activity" of Management's Discussion and Analysis of Financial Condition and Results of Operations).
Lease expirations for Merchandise Mart Properties office space as of December 31, 2011, assuming none of the tenants exercise
renewal options:
Weighted Average Annual
Rent of Expiring Leases
Total
582,000 $
1,395,000
3,187,000
284,000
1,832,000
3,787,000
885,000
8,686,000
222,000
4,705,000
3,003,000
Per Square Foot
25.99
25.74
39.81
38.61
28.39
28.78
23.51
30.99
48.31
31.96
27.00
Year
Month to month
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Number of
Square Feet of
Expiring Leases Expiring Leases
22,000
54,000
80,000
7,000
65,000
132,000
38,000
280,000
5,000
147,000
111,000
7
17
17
6
8
6
3
10
3
6
4
Percentage of
Merchandise Mart
Properties Office
Square Feet
$
1.4%
3.5%
5.1%
0.5%
4.1%
8.5%
2.4%
18.0%
0.3%
9.5%
7.1 %
56
MERCHANDISE MART PROPERTIES – CONTINUED
Showroom Space
The showrooms provide manufacturers and wholesalers with permanent and temporary space in which to display products for
buyers, specifiers and end users. The showrooms are also used for participating in trade shows for the contract furniture, casual
furniture, gift, carpet, crafts, apparel and design industries. Merchandise Mart Properties owns and operates five of the leading
furniture and gift trade shows, including the contract furniture industry’s largest trade show, NeoCon, which attracts approximately
45,000 attendees each June and is hosted at the Merchandise Mart building in Chicago.
Occupancy and weighted average annual rent per square foot:
As of December 31,
2011
2010
2009
2008
2007
Rentable
Square Feet
4,014,000
4,122,000
4,263,000
4,274,000
4,085,000
Occupancy Rate
83.0%
93.8%
89.9%
93.5%
93.5%
Weighted Average
Annual Rent
Per Square Foot
$
31.53
31.53
31.66
30.93
30.55
2011 Merchandise Mart Properties showroom rental revenues by tenants’ industry:
Industry
Residential Design
Contract Furnishing
Gift
Casual Furniture
Apparel
Building Products
Percentage
36 %
22 %
21 %
8 %
8 %
5 %
100 %
2011 Leasing Activity – Merchandise Mart Properties showroom space:
Merchandise Mart, Chicago
Boston Design Center
L.A. Mart
7 West 34th Street
Washington Design Center
Total
Weighted Average
Initial Rent Per
Square Foot (1)
35.73
$
31.96
21.89
42.04
41.73
34.68
Square Feet
261,000
57,000
50,000
45,000
25,000
438,000
(1) Represents the cash basis weighted average starting rents per square foot, which is generally indicative of market rents. Most leases include free
rent and periodic step-ups in rent, which are not included in the initial cash basis rent per square foot leased, but are included in the GAAP basis
straight-line rent per square foot (see "Overview - Leasing Activity" of Management's Discussion and Analysis of Financial Condition and Results of
Operations).
57
MERCHANDISE MART PROPERTIES– CONTINUED
Lease expirations for the Merchandise Mart Properties showroom space as of December 31, 2011, assuming none of the tenants exercise
renewal options:
Number of
Square Feet of
Expiring Leases Expiring Leases
54,000
228,000
368,000
378,000
281,000
297,000
311,000
232,000
85,000
83,000
124,000
17
78
120
133
99
79
45
33
15
20
12
Percentage of
Merchandise Mart
Properties’ Showroom
Square Feet
$
1.3 %
5.7 %
9.2 %
9.4 %
7.0 %
7.4 %
7.7 %
5.8 %
2.1 %
2.1 %
3.1 %
Year
Month to month
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Retail Space
Weighted Average Annual
Rent of Expiring Leases
Total
1,477,000 $
8,160,000
13,797,000
13,356,000
10,254,000
10,268,000
11,516,000
8,222,000
3,101,000
3,437,000
4,082,000
Per Square Foot
$27.51
35.79
37.53
35.33
36.55
34.52
37.07
35.39
36.53
41.65
32.84
The Merchandise Mart Properties segment also contains approximately 92,000 square feet of retail space, of which we own
83,000 square feet that was 92.1% occupied at December 31, 2011.
TOYS “R” US, INC. (“TOYS”)
As of December 31, 2011 we own a 32.7% interest in Toys, a worldwide specialty retailer of toys and baby products, which has a
significant real estate component. Toys had $6.0 billion of outstanding debt at October 29, 2011, of which our pro rata share was $2.0
billion, none of which is recourse to us.
The following table sets forth the total number of stores operated by Toys as of December 31, 2011:
Domestic
International
Total Owned and Leased
Franchised Stores
Total
Leased
360
429
789
Building
Owned on
Leased
Ground
Total
Owned
290
78
368
226
26
252
876
533
1,409
237
1,646
58
OTHER INVESTMENTS
555 California Street Complex
As of December 31, 2011, we own a 70% controlling interest in a three-building office complex containing 1.8 million square
feet, known as the Bank of America Center, located at California and Montgomery Streets in San Francisco’s financial district (“555
California Street”).
Occupancy and weighted average annual rent per square foot as of December 31, 2011:
As of
December 31,
2011
2010
2009
2008
2007
Rentable
Square Feet
1,795,000
1,795,000
1,794,000
1,789,000
1,789,000
2011 rental revenue by tenants’ industry:
Industry
Banking
Finance
Legal Services
Retail
Others
Weighted Average
Annual Rent
Per Square Foot
$
54.40
55.97
57.25
57.98
59.84
Occupancy Rate
93.1%
93.0%
94.8%
94.0%
95.0%
Percentage
43 %
37 %
15 %
2 %
3 %
100 %
Lease terms generally range from five to seven years for smaller tenants to as long as 15 years for major tenants, and may provide
for extension options at market rates. Leases typically provide for periodic step-ups in rent over the term of the lease and pass through
to tenants their share of increases in real estate taxes and operating expenses over a base year. Leases also typically provide for tenant
improvement allowances for all or a portion of the tenant’s initial construction costs of its premises.
Tenants accounting for 2% or more of 555 California Street's revenues:
Tenant
Bank of America
UBS Financial Services
Goldman Sachs & Co.
Kirkland & Ellis LLP
Morgan Stanley & Company, Inc.
Dodge & Cox
McKinsey & Company Inc.
KKR Financial LLC
Jones Day
Symphony Asset Management LLC
Square
Feet Leased
2011
Revenues
650,000 $
106,000
119,000
125,000
121,000
62,000
54,000
59,000
81,000
44,000
35,000,000
7,000,000
6,000,000
6,000,000
6,000,000
4,000,000
4,000,000
4,000,000
3,000,000
3,000,000
Percentage of
Total Company
Percentage of
555 California
Street
Complex’s
Revenues
34.3 %
6.8 %
6.4 %
6.0 %
5.8 %
3.9 %
3.8 %
3.5 %
3.4 %
2.6 %
Revenues
1.2 %
0.2 %
0.2 %
0.2 %
0.2 %
0.1 %
0.1 %
0.1 %
0.1 %
0.1 %
2011 leasing activity:
In 2011, we leased 102,000 square feet at a weighted average rent initial rent of $54.17 per square foot.
59
OTHER INVESTMENTS – CONTINUED
Alexander’s, Inc. (“Alexander’s”)
As of December 31, 2011, we own 32.4% of the outstanding common stock of Alexander’s, which owns seven properties in the
greater New York metropolitan area. Alexander’s had $1.3 billion of outstanding debt at December 31, 2011, of which our pro rata
share was $431 million, none of which is recourse to us.
Lexington Realty Trust (“Lexington”)
As of December 31, 2011, we own 12.0% of the outstanding common shares of Lexington, which has interests in 222 properties,
encompassing approximately 42.1 million square feet across 42 states, generally net-leased to major corporations. Lexington had
approximately $1.7 billion of outstanding debt at September 30, 2011, of which our pro rata share was $205 million, none of which is
recourse to us.
Vornado Capital Partners Real Estate Fund (the “Fund”)
As of December 31, 2011, the Fund has five investments with an aggregate fair value of approximately $346,650,000, or
$11,995,000 in excess of its cost, and has remaining unfunded commitments of $416,600,000, of which our share is $104,150,000.
Hotel Pennsylvania
We own the Hotel Pennsylvania which is located in New York City on Seventh Avenue opposite Madison Square Garden and
consists of a hotel portion containing 1,000,000 square feet of hotel space with 1,700 rooms and a commercial portion containing
400,000 square feet of retail and office space.
Rental information:
Hotel:
Average occupancy rate
Average daily rate
Revenue per available room
Commercial:
Office space:
2011
Year Ended December 31,
2009
2010
2008
2007
89.1 %
150.91 $
134.43 $
83.2 %
143.28 $
119.23 $
71.5 %
133.20 $
95.18 $
84.1 %
171.32 $
144.01 $
84.4 %
154.78
130.70
$
$
Average occupancy rate
Weighted average annual rent per square foot $
33.4 %
13.49 $
33.4 %
7.52 $
30.4 %
20.54 $
30.4 %
18.78 $
57.0 %
22.23
Retail space:
Average occupancy rate
Weighted average annual rent per square foot $
63.0 %
29.01 $
62.3 %
31.42 $
70.7 %
35.05 $
69.5 %
41.75 $
73.3 %
33.63
60
Item 3. Legal Proceedings
We are from time to time involved in legal actions arising in the ordinary course of business. In our opinion, after consultation
with legal counsel, the outcome of such matters, including the matter referred to below, is not expected to have a material adverse
effect on our financial position, results of operations or cash flows.
In 2003, Stop & Shop filed an action against us in the New York Supreme Court, claiming that we had no right to reallocate and
therefore continue to collect $5,000,000 of annual rent from Stop & Shop pursuant to a Master Agreement and Guaranty, because of
the expiration of the leases to which the annual rent was previously allocated. Stop & Shop asserted that an order of the Bankruptcy
Court for the Southern District of New York, as modified on appeal by the District Court, froze our right to reallocate and effectively
terminated our right to collect the annual rent from Stop & Shop. We asserted a counterclaim seeking a judgment for all the unpaid
annual rent accruing through the date of the judgment and a declaration that Stop & Shop will continue to be liable for the annual rent
as long as any of the leases subject to the Master Agreement and Guaranty remain in effect. After summary judgment motions by
both sides were denied, the parties conducted discovery. A trial was held in November 2010. On November 7, 2011, the Court
determined that we have a continuing right to allocate the annual rent to unexpired leases covered by the Master Agreement and
Guaranty, and directed entry of a judgment in our favor ordering Stop & Shop to pay us the unpaid annual rent accrued through
February 28, 2011 in the amount of $37,422,000, a portion of the annual rent due from March 1, 2011 through the date of judgment,
interest, and attorneys’ fees. On December 16, 2011, a money judgment based on the Court’s decision was entered in our favor in the
amount of $56,597,000 (including interest and costs). The amount for attorneys’ fees is being addressed in a proceeding before a
special referee. Stop & Shop has appealed the Court’s decision and the judgment, and has posted a bond to secure payment of the
judgment. On January 12, 2012, we commenced a new action against Stop & Shop seeking recovery of $2,500,000 of annual rent not
included in the money judgment, plus additional annual rent as it accrues.
As of December 31, 2011, we have a $41,983,000 receivable from Stop and Shop, excluding amounts due to us for interest and
costs resulting from the Court’s judgment. In the fourth quarter of 2011, based on the Court’s decision, we recognized $23,521,000 of
income, representing the portion of the $41,983,000 receivable that was previously reserved. As a result of Stop & Shop’s appeal, we
believe, after consultation with counsel, that the maximum reasonably possible loss is up to the total amount of the receivable of
$41,983,000.
Item 4. Mine Safety Disclosures
Not applicable.
61
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Vornado’s common shares are traded on the New York Stock Exchange under the symbol “VNO.”
Quarterly high and low sales prices of the common shares and dividends paid per share for the years ended December 31, 2011
and 2010 were as follows:
Year Ended
December 31, 2011
Year Ended
December 31, 2010
Quarter
High
Low
Dividends
High
Low
Dividends
1st
2nd
3rd
4th
$
$
93.53
98.42
98.77
84.30
$
82.12
86.85
72.85
68.39
0.69
0.69
0.69
0.69
$
$
78.40
86.79
89.06
91.67
$
61.25
70.06
68.59
78.06
0.65
0.65
0.65
0.65
As of February 1, 2012, there were 1,230 holders of record of our common shares.
Recent Sales of Unregistered Securities
During the fourth quarter of 2011, we issued 20,891 common shares upon the redemption of Class A units of the Operating
Partnership held by persons who received units, in private placements in earlier periods, in exchange for their interests in limited
partnerships that owned real estate. The common shares were issued without registration under the Securities Act of 1933 in reliance
on Section 4 (2) of that Act.
Information relating to compensation plans under which our equity securities are authorized for issuance is set forth under Part
III, Item 12 of this Annual Report on Form 10-K and such information is incorporated by reference herein.
Recent Purchases of Equity Securities
In December 2011, we received 410,783 Vornado Common shares at an average price of $76.36 per share as payment for the
exercise of certain employee options.
62
Performance Graph
The following graph is a comparison of the five-year cumulative return of our common shares, the Standard & Poor’s 500 Index
(the “S&P 500 Index”) and the National Association of Real Estate Investment Trusts’ (“NAREIT”) All Equity Index (excluding
health care real estate investment trusts), a peer group index. The graph assumes that $100 was invested on December 31, 2006 in our
common shares, the S&P 500 Index and the NAREIT All Equity Index and that all dividends were reinvested without the payment of
any commissions. There can be no assurance that the performance of our shares will continue in line with the same or similar trends
depicted in the graph below.
Comparison of Five-Year Cumulative Return
$120
$100
$80
$60
$40
2006
2007
2008
2009
2010
2011
Vornado Realty Trust
S&P 500 Index
The NAREIT All Equity Index
Vornado Realty Trust
S&P 500 Index
The NAREIT All Equity Index
2006
2007
2008
2009
2010
100
100
100
75
105
84
54
66
53
66
84
67
82
97
86
2011
78
99
93
63
ITEM 6. SELECTED FINANCIAL DATA
(Amounts in thousands, except per share amounts)
Operating Data:
Revenues:
Property rentals
Tenant expense reimbursements
Cleveland Medical Mart development project
Fee and other income
Total revenues
Expenses:
Operating
Depreciation and amortization
General and administrative
Cleveland Medical Mart development project
Tenant buy-outs, impairment losses and
other acquisition related costs
Total expenses
Operating income
Income (loss) applicable to Toys "R" Us
Income (loss) from partially owned entities
Income (loss) from Real Estate Fund
Interest and other investment income (loss), net
Interest and debt expense
Net gain (loss) on extinguishment of debt
Net gain on disposition of wholly owned and partially
owned assets
Income before income taxes
Income tax (expense) benefit
Income from continuing operations
Income (loss) from discontinued operations
Net income
Less:
Net (income) loss attributable to noncontrolling
interests in consolidated subsidiaries
Net income attributable to noncontrolling interests
in the Operating Partnership, including unit
distributions
Net income attributable to Vornado
Preferred share dividends
Discount on preferred share and unit redemptions
Net income attributable to common shareholders
Income from continuing operations, net - basic
Income from continuing operations, net - diluted
Net income per common share - basic
Net income per common share - diluted
Dividends per common share
Balance Sheet Data:
Total assets
Real estate, at cost
Accumulated depreciation
Debt
Total equity
2011
2010
Year Ended December 31,
2009
2008
2007
$
2,261,811 $
349,420
154,080
150,354
2,915,665
2,237,707 $
355,616
-
147,358
2,740,681
2,148,975 $
351,290
-
155,326
2,655,591
2,121,234 $
347,932
-
126,018
2,595,184
1,885,580
313,501
-
108,693
2,307,774
1,091,597
553,811
209,981
145,824
1,082,844
522,022
213,949
-
1,050,545
519,534
230,584
-
1,031,843
519,850
193,593
-
58,299
2,059,512
856,153
48,540
71,770
22,886
148,826
(544,015)
-
15,134
619,294
(24,827)
594,467
145,533
740,000
129,458
1,948,273
792,408
71,624
22,438
(303)
235,315
(560,052)
94,789
81,432
737,651
(22,476)
715,175
(7,144)
708,031
73,763
1,874,426
781,165
92,300
(19,910)
-
(116,350)
(617,768)
(25,915)
5,641
99,163
(20,642)
78,521
49,929
128,450
81,447
1,826,733
768,451
2,380
(159,207)
-
(2,747)
(619,298)
9,820
7,757
7,156
204,644
211,800
199,645
411,445
915,609
424,012
188,513
-
10,375
1,538,509
769,265
(14,337)
82,480
-
226,242
(583,042)
-
39,493
520,101
(9,057)
511,044
96,789
607,833
(21,786)
(4,920)
2,839
3,263
3,494
$
$
(55,912)
662,302
(65,531)
5,000
(55,228)
647,883
(55,534)
4,382
(25,120)
106,169
(57,076)
-
(55,411)
359,297
(57,091)
-
601,771 $
596,731 $
49,093 $
302,206 $
(69,788)
541,539
(57,177)
-
484,362
$
2.52
2.50
3.26
3.23
2.76
$
3.31
3.28
3.27
3.24
2.60
0.01 $
0.01
0.28
0.28
3.20
0.77 $
0.75
1.96
1.91
3.65
2.58
2.48
3.18
3.05
3.45
$ 20,446,487 $ 20,517,471 $ 20,185,472 $ 21,418,048 $ 22,478,717
16,336,129
(1,723,952)
11,456,399
6,011,240
17,387,701
(2,715,046)
10,889,442
6,830,405
17,293,970
(2,395,608)
10,681,342
6,649,406
17,140,726
(2,068,357)
12,176,317
6,214,652
17,627,011
(3,095,037)
10,562,002
7,508,447
64
(Amounts in thousands)
Other Data:
Funds From Operations ("FFO")(1):
Net income attributable to Vornado
Depreciation and amortization of real property
Net gain on sales of real estate
Real estate impairment losses
Proportionate share of adjustments to equity in net income
of Toys, to arrive at FFO:
Depreciation and amortization of real property
Net gain on sales of real estate
Income tax effect of above adjustments
Proportionate share of adjustments to equity in net income of
partially owned entities, excluding Toys, to arrive at FFO:
Depreciation and amortization of real property
Net gain on sales of real estate
Real estate impairment losses
Noncontrolling interests' share of above adjustments
FFO
Preferred share dividends
Discount on preferred share and unit redemptions
FFO attributable to common shareholders
Interest on 3.88% exchangeable senior debentures
Convertible preferred share dividends
FFO attributable to common shareholders
plus assumed conversions(1)
2011
Year Ended December 31,
2009
2010
2008
2007
$
662,302 $
530,113
(51,623)
28,799
647,883 $
505,806
(57,248)
97,500
106,169 $
508,572
(45,282)
23,203
359,297 $
509,367
(57,523)
-
541,539
451,313
(60,811)
-
70,883
(491)
(24,634)
70,174
-
(24,561)
65,358
(164)
(22,819)
66,435
(719)
(23,223)
85,244
(3,012)
(28,781)
99,992
(9,276)
-
(40,957)
1,265,108
(65,531)
5,000
1,204,577
26,272
124
78,151
(5,784)
11,481
(46,794)
1,276,608
(55,534)
4,382
1,225,456
25,917
160
75,200
(1,188)
-
(47,022)
662,027
(57,076)
-
604,951
-
170
49,513
(8,759)
-
(49,683)
844,705
(57,091)
-
787,614
25,261
189
48,770
(12,451)
-
(46,664)
975,147
(57,177)
-
917,970
24,958
277
$ 1,230,973 $ 1,251,533 $
605,121 $
813,064 $
943,205
________________________________
(1) FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate
Investment Trusts (“NAREIT”). In the fourth quarter of 2011 and the first quarter of 2012, NAREIT issued updated guidance on
FFO and modified its definition of FFO to specifically exclude real estate impairment losses, including the pro rata share of such
losses of unconsolidated subsidiaries. To the extent applicable, NAREIT requested companies to restate prior period FFO to
conform to the new definition. Accordingly, we have restated our 2010 and 2009 FFO to exclude real estate impairment losses
aggregating $108,981 and $23,203, respectively. NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gain
from sales of depreciated real estate assets, real estate impairment losses, depreciation and amortization expense from real estate
assets, extraordinary items and other specified non-cash items, including the pro rata share of such adjustments of unconsolidated
subsidiaries. FFO and FFO per diluted share are used by management, investors and analysts to facilitate meaningful
comparisons of operating performance between periods and among our peers because it excludes the effect of real estate
depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of
real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. FFO does not represent
cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should
not be considered as an alternative to net income as a performance measure or cash flows as a liquidity measure. FFO may not be
comparable to similarly titled measures employed by other companies.
65
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
Overview - Leasing activity
Critical Accounting Policies
Net Income and EBITDA by Segment for the Years Ended
December 31, 2011, 2010 and 2009
Results of Operations:
Years Ended December 31, 2011 and 2010
Years Ended December 31, 2010 and 2009
Supplemental Information:
Net Income and EBITDA by Segment for the Three Months Ended
December 31, 2011 and 2010
Three Months Ended December 31, 2011 Compared to December 31, 2010
Three Months Ended December 31, 2011 Compared to September 30, 2011
Related Party Transactions
Liquidity and Capital Resources
Financing Activities and Contractual Obligations
Certain Future Cash Requirements
Cash Flows for the Year Ended December 31, 2011
Cash Flows for the Year Ended December 31, 2010
Cash Flows for the Year Ended December 31, 2009
Funds From Operations for the Three Months and Years Ended
December 31, 2011 and 2010
Page
67
74
77
80
85
91
97
101
102
103
104
104
107
110
112
114
116
66
Overview
Vornado Realty Trust (“Vornado”) is a fully-integrated real estate investment trust (“REIT”) and conducts its business through,
and substantially all of its interests in properties are held by, Vornado Realty L.P., a Delaware limited partnership (the “Operating
Partnership”). Accordingly, Vornado’s cash flow and ability to pay dividends to its shareholders is dependent upon the cash flow of
the Operating Partnership and the ability of its direct and indirect subsidiaries to first satisfy their obligations to creditors. Vornado is
the sole general partner of, and owned approximately 93.5% of the common limited partnership interest in the Operating Partnership
at December 31, 2011. All references to “we,” “us,” “our,” the “Company” and “Vornado” refer to Vornado Realty Trust and its
consolidated subsidiaries, including the Operating Partnership.
We own and operate office, retail and showroom properties (our “core” operations) with large concentrations of office and retail
properties in the New York City metropolitan area and in the Washington, DC / Northern Virginia area. In addition, we have a 32.7%
interest in Toys “R” Us, Inc. (“Toys”) which has a significant real estate component, a 32.4% interest in Alexander’s, Inc. (NYSE:
ALX) (“Alexander’s”), which has seven properties in the greater New York metropolitan area, as well as interests in other real estate
and related investments.
Our business objective is to maximize shareholder value, which we measure by the total return provided to our shareholders.
Below is a table comparing our performance to the Morgan Stanley REIT Index (“RMS”) and the SNL REIT Index (“SNL”) for the
following periods ended December 31, 2011:
One-year
Three-year
Five-year
Ten-year
Vornado
(4.6%)
40.2%
(25.2%)
187.0%
Total Return(1)
RMS
8.7%
79.6%
(7.3%)
163.2%
SNL
8.3%
79.9%
(3.9%)
175.4%
(1) Past performance is not necessarily indicative of future performance.
We intend to achieve our business objective by continuing to pursue our investment philosophy and executing our operating
strategies through:
• Maintaining a superior team of operating and investment professionals and an entrepreneurial spirit;
•
Investing in properties in select markets, such as New York City and Washington, DC, where we believe there is a high likelihood
of capital appreciation;
Investing in retail properties in select under-stored locations such as the New York City metropolitan area;
• Acquiring quality properties at a discount to replacement cost and where there is a significant potential for higher rents;
•
• Developing and redeveloping existing properties to increase returns and maximize value; and
•
Investing in operating companies that have a significant real estate component.
We expect to finance our growth, acquisitions and investments using internally generated funds, proceeds from possible asset
sales and by accessing the public and private capital markets. We may also offer Vornado common or preferred shares or Operating
Partnership units in exchange for property and may repurchase or otherwise reacquire these securities in the future.
We compete with a large number of real estate property owners and developers, some of which may be willing to accept lower
returns on their investments than we are. Principal factors of competition include rents charged, attractiveness of location, the quality
of the property and the breadth and the quality of services provided. Our success depends upon, among other factors, trends of the
national, regional and local economies, the financial condition and operating results of current and prospective tenants and customers,
availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation and population trends.
See “Risk Factors” in Item 1A for additional information regarding these factors.
67
Overview - continued
Year Ended December 31, 2011 Financial Results Summary
Net income attributable to common shareholders for the year ended December 31, 2011 was $601,771,000, or $3.23 per diluted
share, compared to $596,731,000, or $3.24 per diluted share, for the year ended December 31, 2010. Net income for the years ended
December 31, 2011 and 2010 includes $61,390,000 and $63,032,000, respectively, of net gains on sale of real estate, and $28,799,000
and $108,981,000, respectively, of real estate impairment losses. In addition, the years ended December 31, 2011 and 2010 include
certain items that affect comparability which are listed in the table below. The aggregate of net gains on sale of real estate, real estate
impairment losses and the items in the table below, net of amounts attributable to noncontrolling interests, increased net income
attributable to common shareholders by $243,606,000, or $1.31 per diluted share for the year ended December 31, 2011 and
$188,805,000, or $1.03 per diluted share for the year ended December 31, 2010.
Funds from operations attributable to common shareholders plus assumed conversions (“FFO”) for the year ended December 31,
2011 was $1,230,973,000, or $6.42 per diluted share, compared to $1,251,533,000, or $6.59 per diluted share, for the prior year. FFO
for the years ended December 31, 2011 and 2010 includes certain items that affect comparability which are listed in the table below.
The aggregate of these items, net of amounts attributable to noncontrolling interests, increased FFO by $219,562,000, or $1.15 per
diluted share for the year ended December 31, 2011 and $250,360,000, or $1.32 per diluted share for the year ended December 31,
2010.
(Amounts in thousands)
Items that affect comparability income (expense):
Net gain on extinguishment of debt
Mezzanine loan loss reversals and net gain on disposition
Our share of LNR's income tax benefit, asset sales and tax settlement gains
Recognition of disputed receivable from Stop & Shop
Income from the mark-to-market of J.C. Penney derivative position
Net gain from Suffolk Downs' sale of a partial interest
Net gain resulting from Lexington Realty Trust's stock issuance
Discount on preferred share and unit redemptions
Net gain on sale of condominiums
Tenant buy-outs and acquisition costs
Non-cash asset write-downs:
Real estate - development related
Partially owned entities
Merchandise Mart restructuring costs
Real Estate Fund placement fees
Default interest and fees accrued on loans in special servicing
FFO attributable to discontinued operations
Other, net
Noncontrolling interests' share of above adjustments
Items that affect comparability, net
For the Year Ended
December 31,
2011
2010
$
$
83,907
82,744
27,377
23,521
12,984
12,525
9,760
7,000
5,884
(30,071)
-
(13,794)
(4,226)
(3,451)
-
22,227
(2,077)
234,310
(14,748)
219,562
$
$
92,150
53,100
-
-
130,153
-
13,710
11,354
3,149
(6,945)
(30,013)
-
-
(6,482)
(15,079)
33,679
(10,072)
268,704
(18,344)
250,360
The percentage increase (decrease) in GAAP basis and cash basis same store Earnings Before Interest, Taxes, Depreciation and
Amortization (“EBITDA”) of our operating segments for the year ended December 31, 2011 over the year ended December 31, 2010
is summarized below.
Same Store EBITDA:
December 31, 2011 vs. December 31, 2010
GAAP basis
Cash Basis
New York
Office
Washington, DC
Office
Retail
Merchandise
Mart
(0.1%)
1.8%
0.9%
1.8%
3.1%
6.4%
0.5%
3.5%
68
Overview - continued
Quarter Ended December 31, 2011 Financial Results Summary
Net income attributable to common shareholders for the quarter ended December 31, 2011 was $69,508,000, or $0.37 per diluted
share, compared to $243,414,000, or $1.31 per diluted share, for the quarter ended December 31, 2010. Net income for the quarters
ended December 31, 2011 and 2010 includes $1,916,000 and $62,718,000, respectively, of net gains on sale of real estate, and
$28,799,000 and $103,981,000, respectively, of real estate impairment losses. In addition, the quarters ended December 31, 2011 and
2010 include certain other items that affect comparability which are listed in the table below. The aggregate of net gains on sale of
real estate, real estate impairment losses and the items in the table below, net of amounts attributable to noncontrolling interests,
increased net income attributable to common shareholders by $34,999,000, or $0.19 per diluted share for the quarter ended December
31, 2011 and $173,501,000, or $0.91 per diluted share for the quarter ended December 31, 2010.
FFO for the quarter ended December 31, 2011 was $280,369,000, or $1.46 per diluted share, compared to $432,860,000, or $2.27
per diluted share, for the prior year’s quarter. FFO for the quarters ended December 31, 2011 and 2010 include certain items that
affect comparability which are listed in the table below. The aggregate of these items, net of amounts attributable to noncontrolling
interests, increased FFO by $60,261,000, or $0.31 per diluted share for the quarter ended December 31, 2011 and $214,565,000, or
$1.12 per diluted share for the quarter ended December 31, 2010.
(Amounts in thousands)
Items that affect comparability income (expense):
Income from the mark-to-market of J.C. Penney derivative position
Recognition of disputed receivable from Stop & Shop
Net gain from Suffolk Downs' sale of a partial interest
Our share of LNR's income tax benefit
Net gain on extinguishment of debt
Mezzanine loan loss reversal
Net gain resulting from Lexington Realty Trust's stock issuance
Non-cash asset write-downs:
Real estate - development related
Partially owned entities
Tenant buy-outs and acquisition costs
FFO attributable to discontinued operations
Other, net
Noncontrolling interests' share of above adjustments
Items that affect comparability, net
For the Three Months Ended
December 31,
2011
2010
$
$
40,120
23,521
12,525
12,380
-
-
-
-
(13,794)
(10,656)
5,039
(4,833)
64,302
(4,041)
60,261
$
$
97,904
-
-
-
93,946
60,000
7,712
(30,013)
-
(4,094)
7,373
(3,174)
229,654
(15,089)
214,565
The percentage increase (decrease) in GAAP basis and cash basis same store EBITDA of our operating segments for the quarter
ended December 31, 2011 over the quarter ended December 31, 2010 and the trailing quarter ended September 30, 2011 are
summarized below.
Same Store EBITDA:
December 31, 2011 vs. December 31, 2010
GAAP basis
Cash Basis
December 31, 2011 vs. September 30, 2011
GAAP basis
Cash Basis
(1) Primarily from the timing of trade shows.
New York
Office
Washington, DC
Office
Retail
Merchandise
Mart
3.3%
5.6%
3.7%
1.1%
(3.0%)
(2.5%)
(3.2%)
(2.9%)
2.4%
6.0%
2.5%
6.3%
8.9%
10.5%
23.5% (1)
20.8% (1)
Calculations of same store EBITDA, reconciliations of our net income to EBITDA and FFO and the reasons we consider these
non-GAAP financial measures useful are provided in the following pages of Management’s Discussion and Analysis of the Financial
Condition and Results of Operations.
69
Overview – continued
Vornado Capital Partners Real Estate Fund (the “Fund”)
In February 2011, the Fund’s subscription period closed with an aggregate of $800,000,000 of capital commitments, of which we
committed $200,000,000. We are the general partner and investment manager of the Fund, which has an eight-year term and a three-
year investment period. During the investment period, which concludes in July 2013, the Fund is our exclusive investment vehicle for
all investments that fit within its investment parameters, as defined. The Fund is accounted for under the AICPA Investment
Company Guide and its investments are reported on its balance sheet at fair value, with changes in value each period recognized in
earnings. We consolidate the accounts of the Fund into our consolidated financial statements, retaining the fair value basis of
accounting.
During 2011, the Fund made three investments (described below) aggregating $248,500,000 and exited two investments. As of
December 31, 2011, the Fund has five investments with an aggregate fair value of approximately $346,650,000, or $11,995,000 in
excess of cost, and has remaining unfunded commitments of $416,600,000, of which our share is $104,150,000.
One Park Avenue
On March 1, 2011, the Fund as a co-investor (64.7% interest), together with Vornado (30.3% interest), acquired a 95% interest in
One Park Avenue, a 932,000 square foot office building located between 32nd and 33rd Streets in New York, for $374,000,000. The
purchase price consisted of $137,000,000 in cash and 95% of a $250,000,000 five-year mortgage that bears interest at 5.0%.
Crowne Plaza Times Square
On December 16, 2011, the Fund formed a joint venture with the owner of the property to recapitalize the Crowne Plaza Hotel in
Times Square. The property is located at 48th Street and Broadway in Times Square and is comprised of a 795-key hotel, 14,000
square feet of prime retail space, 212,000 square feet of office space, nine large signage offerings, a 159-space parking garage and a
health club. The joint venture plans to reconfigure and reposition the retail and office space as well as add additional signage.
Vornado will manage and lease the commercial components of the property and the joint venture partner will asset manage the hotel.
This transaction was initiated by us in May 2011, when the Fund acquired a $34,000,000 mezzanine position in the junior most
tranche of the property’s mezzanine debt. In December 2011, the Fund contributed $31,000,000 and its partner contributed
$22,000,000 of new capital to pay down third party debt and for future capital expenditures. The new capital was contributed in the
form of debt that is convertible into preferred equity that receives a priority return and then will receive a profit participation. The
Fund has an economic interest of approximately 38% in the property. The Fund’s investment is subordinate to the property’s
$259,000,000 of senior debt which matures in December 2013, with a one-year extension option.
11 East 68th Street
On December 29, 2011, the Fund committed to acquire the retail portion of 11 East 68th Street, an 11-story residential and retail
property located on Madison Avenue and 68th Street, for $50,500,000. The retail portion of the property consists of two retail units
aggregating 5,000 square feet. The Fund provided $21,200,000 at closing and will provide the remaining $29,300,000 over the next
two years. In addition, the Fund has also provided a $21,000,000 mezzanine loan on the residential portion of the property, which
bears paid-in-kind interest at 15%, matures in three years and has a one-year extension option.
70
Overview – continued
2011 Acquisitions and Investments
1399 New York Avenue (the “Executive Tower”)
On December 23, 2011, we acquired the 97.5% interest that we did not already own in the Executive Tower, an 11-story, 128,000
square foot Class A office building located in the Washington, CBD East End submarket close to the White House, for $104,000,000
in cash.
666 Fifth Avenue Office
On December 16, 2011, we formed a joint venture with an affiliate of the Kushner Companies to recapitalize the office portion of
666 Fifth Avenue, a 39-story, 1.4 million square foot Class A office building in Manhattan, located on the full block front of Fifth
Avenue between 52nd and 53rd Street. We acquired a 49.5% interest in the property from the Kushner Companies, the current owner.
In connection therewith, the existing $1,215,000,000 mortgage loan was modified by LNR, the special servicer, into a $1,100,000,000
A-Note and a $115,000,000 B-Note and extended to February 2019; and a portion of the current pay interest was deferred to the B-
Note. We and the Kushner Companies have committed to lend the joint venture an aggregate of $110,000,000 (of which our share is
$80,000,000) for tenant improvements and working capital for the property, which is senior to the $115,000,000 B-Note. In addition,
we have provided the A-Note holders a limited recourse and cooperation guarantee of up to $75,000,000 if an event of default occurs
and is ongoing.
Independence Plaza
On June 17, 2011, a joint venture in which we are a 51% partner invested $55,000,000 in cash (of which we contributed
$35,000,000) to acquire a face amount of $150,000,000 of mezzanine loans and a $35,000,000 participation in a senior loan on
Independence Plaza, a residential complex comprised of three 39-story buildings in the Tribeca submarket of Manhattan.
280 Park Avenue Joint Venture
On March 16, 2011, we formed a 50/50 joint venture with SL Green Realty Corp to own the mezzanine debt of 280 Park Avenue,
a 1.2 million square foot office building located between 48th and 49th Streets in Manhattan (the “Property”). We contributed our
mezzanine loan with a face amount of $73,750,000 and they contributed their mezzanine loans with a face amount of $326,250,000 to
the joint venture. We equalized our interest in the joint venture by paying our partner $111,250,000 in cash and assuming
$15,000,000 of their debt. On May 17, 2011, as part of the recapitalization of the Property, the joint venture contributed its debt
position for 99% of the common equity of a new joint venture which owns the Property. The new joint venture’s investment is
subordinate to $710,000,000 of third party debt. The new joint venture expects to spend $150,000,000 for re-tenanting and
repositioning the Property.
2011 Dispositions
On January 6, 2012, we completed the sale of 350 West Mart Center, a 1.2 million square foot office building located in Chicago,
Illinois, for $228,000,000 in cash, which resulted in a net gain of $54,200,000 that will be recognized in the first quarter of 2012.
On March 31, 2011, the receiver completed the disposition of the High Point Complex in North Carolina. In connection
therewith, the property and related debt were removed from our consolidated balance sheet and we recognized a net gain of
$83,907,000 on the extinguishment of debt.
On January 12, 2011, we sold 1140 Connecticut Avenue and 1227 25th Street in Washington, DC, for $127,000,000 in cash,
which resulted in a net gain of $45,862,000.
In 2011, we sold three retail properties in separate transactions for an aggregate of $40,990,000 in cash, which resulted in net
gains of $5,761,000.
71
Overview – continued
2011 Financing Activities
Senior Unsecured Debt
On November 30, 2011, we completed a public offering of $400,000,000 aggregate principal amount of 5.0%, ten-year senior
unsecured notes and retained net proceeds of approximately $395,584,000. The notes were sold at 99.546% of their face amount to
yield 5.057%.
In 2011, we renewed both of our unsecured revolving credit facilities aggregating $2,500,000,000. The first facility, which was
renewed in June 2011, bears interest on drawn amounts at LIBOR plus 1.35% and has a 0.30% facility fee (drawn or undrawn). The
second facility, which was renewed in November 2011, bears interest on drawn amounts at LIBOR plus 1.25% and has a 0.25%
facility fee (drawn or undrawn). The LIBOR spread and facility fee on both facilities are based on our credit ratings. Both facilities
mature in four years and have one-year extension options. As of December 31, 2011, an aggregate of $138,000,000 was outstanding
under these facilities.
Secured Debt
On January 9, 2012, we completed a $300,000,000 refinancing of 350 Park Avenue, a 557,000 square foot Manhattan office
building. The five-year fixed rate loan bears interest at 3.75% and amortizes based on a 30-year schedule beginning in the third year.
The proceeds of the new loan and $132,000,000 of existing cash were used to repay the existing loan and closing costs.
On December 28, 2011, we completed a $330,000,000 refinancing of Eleven Penn Plaza, a 1.1 million square foot Manhattan
office building. The seven-year loan bears interest at LIBOR plus 2.35% and amortizes based on a 30-year schedule beginning in the
fourth year. We retained net proceeds of approximately $126,000,000 after repaying the existing loan and closing costs.
On September 1, 2011, we completed a $600,000,000 refinancing of 555 California Street, a three-building office complex
aggregating 1.8 million square feet in San Francisco’s financial district, known as the Bank of America Center, in which we own a
70% controlling interest. The 10-year fixed rate loan bears interest at 5.10% and amortizes based on a 30-year schedule beginning in
the fourth year. The proceeds of the new loan and $45,000,000 of existing cash were used to repay the existing loan and closing costs.
On May 11, 2011, we repaid the outstanding balance of the construction loan on West End 25, and closed on a $101,671,000
mortgage at a fixed rate of 4.88%. The loan has a 10-year term and amortizes based on a 30-year schedule beginning in the sixth year.
On February 11, 2011, we completed a $425,000,000 refinancing of Two Penn Plaza, a 1.6 million square foot Manhattan office
building. The seven-year loan bears interest at LIBOR plus 2.00%, which was swapped for the term of the loan to a fixed rate of
5.13%. The loan amortizes based on a 30-year schedule beginning in the fourth year. We retained net proceeds of approximately
$139,000,000 after repaying the existing loan and closing costs.
On February 10, 2011, we completed a $150,000,000 financing of 2121 Crystal Drive, a 506,000 square foot office building
located in Crystal City, Arlington, Virginia. The 12-year fixed rate loan bears interest at 5.51% and amortizes based on a 30-year
schedule beginning in the third year. This property was previously unencumbered.
72
Overview – continued
2011 Financing Activities – continued
Secured Debt – continued
On January 18, 2011, we repaid the outstanding balance of the construction loan on 220 20th Street and closed on a $76,100,000
mortgage at a fixed rate of 4.61%. The loan has a seven-year term and amortizes based on a 30-year schedule.
On January 10, 2011, we completed a $75,000,000 financing of North Bergen (Tonnelle Avenue), a 410,000 square foot strip
shopping center. The seven-year fixed rate loan bears interest rate at 4.59% and amortizes based on a 25-year schedule beginning in
the sixth year. This property was previously unencumbered.
On January 6, 2011, we completed a $60,000,000 financing of land under a portion of the Borgata Hotel and Casino complex.
The 10-year fixed rate loan bears interest at 5.14% and amortizes based on a 30-year schedule beginning in the third year.
Preferred Equity
On April 20, 2011, we sold 7,000,000 6.875% Series J Cumulative Redeemable Preferred Shares at a price of $25.00 per share, in
an underwritten public offering pursuant to an effective registration statement. On April 21, 2011, the underwriters exercised their
option to purchase an additional 1,050,000 shares to cover over-allotments. On May 5, 2011 and August 5, 2011 we sold an
additional 800,000 and 1,000,000 shares, respectively, at a price of $25.00 per share. We retained aggregate net proceeds of
$238,842,000, after underwriters’ discounts and issuance costs and contributed the net proceeds to the Operating Partnership in
exchange for 9,850,000 Series J Preferred Units (with economic terms that mirror those of the Series J Preferred Shares).
73
Overview - continued
Leasing Activity
The leasing activity presented below is based on leases signed during the period and is not intended to coincide with the
commencement of rental revenue in accordance with accounting principles generally accepted in the United States of America
(“GAAP”). Tenant improvements and leasing commissions presented below are based on square feet leased during the period.
New York
Office
Washington, DC
Office
Retail (4)
Merchandise Mart
Office
Showroom
(Square feet in thousands)
As of December 31, 2011:
Total square feet (in service)
Our share of square feet (in service)
Number of properties
Occupancy rate
Leasing Activity:
Quarter Ended December 31, 2011:
Total square feet leased
Our share of square feet leased
Initial rent (1)
Weighted average lease term (years)
Relet space (included above):
Square feet
Cash basis:
Initial rent (1)
Prior escalated rent
Percentage increase (decrease)
GAAP basis:
Straight-line rent (2)
Prior straight-line rent
Percentage increase
Tenant improvements and leasing
commissions:
Per square foot
Per square foot per annum:
Percentage of initial rent
Year Ended December 31, 2011:
Total square feet leased
Our share of square feet leased
Initial rent (1)
Weighted average lease term (years)
Relet space (included above):
Square feet
Cash basis:
Initial rent (1)
Prior escalated rent
Percentage increase (decrease)
GAAP basis:
Straight-line rent (2)
Prior straight-line rent
Percentage increase
Tenant improvements and leasing
commissions:
Per square foot
Per square foot per annum:
Percentage of initial rent
20,773
17,546
30
95.6%
20,529
17,925
77
90.0%(3)
25,245
23,012
155
93.0%
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1,138
925
50.99
8.5
832
50.04
45.71
9.5%
50.13
43.43
15.4%
44.25
5.21
10.2%
3,211
2,432
55.37
9.2
2,089
56.21
47.66
18.0%
56.19
47.47
18.4%
48.28
5.25
9.5%
$
$
$
$
$
$
$
$
$
$
$
$
$
$
605
575
42.30
7.5
497
41.99
39.00
7.7%
41.72
38.38
8.7%
35.05
4.67
11.0%
1,784
1,606
40.99
5.6
1,427
40.79
38.65
5.5%
40.43
37.33
8.3%
25.21
4.50
11.0%
$
$
$
$
$
$
$
$
$
$
$
$
$
$
382
382
23.37
8.6
190
15.58
14.76
5.6%
15.73
13.69
14.9%
8.70
1.01
4.3%
1,554
1,522
24.95
8.7
629
19.88
18.21
9.2%
20.46
17.56
16.5%
7.47
0.86
3.4%
$
$
$
$
$
$
$
$
$
$
$
$
$
$
As of December 31, 2010:
Total square feet (in service)
Our share of square feet (in service)
Number of properties
Occupancy rate
See notes on the following page.
17,454
16,194
28
95.6%
21,149
17,823
82
94.3%(3)
25,557
23,453
161
92.3%
74
1,556
1,556
5
90.5%
68
68
26.00
12.0
68
26.00
24.92
4.3%
26.58
22.26
19.4%
83.30
6.94
26.7%
257
257
27.61
8.2
257
27.61
27.52
0.3%
27.99
24.40
14.7%
61.12
7.45
27.0%
1,448
1,448
5
91.8%
$
$
$
$
$
$
$
$
$
$
$
$
$
$
4,014
4,014
5
83.0%
80
80
30.99
4.0
80
30.99
34.02
(8.9%)
30.55
30.07
1.6%
3.00
0.75
2.4%
438
438
34.68
5.6
438
34.68
36.33
(4.5%)
33.71
32.86
2.6%
5.31
0.95
2.7%
4,122
4,122
5
93.8%
Overview - continued
(Square feet in thousands)
Leasing Activity:
Year Ended December 31, 2010:
Total square feet leased
Our share of square feet leased:
Initial rent (1)
Weighted average lease term (years)
Relet space (included above):
Square feet
Cash basis:
Initial rent (1)
Prior escalated rent
Percentage (decrease) increase
GAAP basis:
Straight-line rent(2)
Prior straight-line rent
Percentage (decrease) increase
Tenant improvements and leasing
commissions:
Per square foot
Per square foot per annum:
Percentage of initial rent
$
$
$
$
$
$
$
New York
Office
Washington, DC
Office
Retail (4)
Merchandise Mart
Office
Showroom
1,364
1,277
49.81 $
7.5
1,837
1,697
38.41 $
4.4
1,061
1,385
49.65 $
51.91 $
(4.4%)
48.35 $
49.27 $
(1.9%)
50.29 $
6.70 $
13.5%
38.51 $
36.71 $
4.9%
38.59 $
35.08 $
10.0%
12.85 $
2.92 $
7.6%
1,237
1,209
24.36 $
8.5
392
18.09 $
16.76 $
7.9%
18.70 $
16.49 $
13.4%
171
171
30.61
12.3
24
24.44
23.99
1.9%
21.63
23.03
(6.1%)
11.98 $
1.41 $
5.8%
100.73
8.19
26.8%
$
$
$
$
$
$
$
596
596
36.20
5.0
596
36.20
36.98
(2.1%)
34.90
33.57
4.0%
6.56
1.31
3.6%
(1) Represents the cash basis weighted average starting rent per square foot, which is generally indicative of market rents. Most leases include free
rent and periodic step-ups in rent which are not included in the initial cash basis rent per square foot but are included in the GAAP basis straight-
line rent per square foot.
(2)
Represents the GAAP basis weighted average rent per square foot that is recognized over the term of the respective leases, and includes the
effect of free rent and periodic step-ups in rent.
(3) Excluding residential and other properties, occupancy rates for the office properties were as follows.
December 31, 2011
December 31, 2010
88.7%
94.0%
(4) Mall store sales per square foot for in-line stores with less than 10,000 square feet, including partially owned malls, for the trailing twelve
months ended December 31, 2011 and 2010 were $467 and $463, respectively.
75
Overview - continued
Washington, DC Office Properties Segment
EBITDA was $481,077,000 for the year ended December 31, 2011, compared to $497,551,000 for the prior year, a decrease of
$16,474,000. 2011 and 2010 included an aggregate of $51,050,000 and $73,901,000, respectively of EBITDA from discontinued
operations and net gains on sale of real estate. In addition, 2010 included a $10,056,000 litigation loss accrual. Adjusting for these
items, 2011 EBITDA was lower than the prior year by $3,679,000, or 0.8%. Same Store EBITDA was higher than the prior year by
0.9% (see page 90 for a reconciliation of EBITDA to Same Store EBITDA).
We estimate that occupancy will decrease from 90% at December 31, 2011, to between 82% to 84% in 2012 and that 2012
EBITDA will be lower than 2011 by approximately $55,000,000 to $65,000,000, based on 2,902,000 square feet expiring in 2012,
partially offset by leasing over 1,000,000 square feet. A significant portion of the vacancy is related to the Base Realignment and
Closure (“BRAC”) statute. We estimate it will take approximately two to three years to fully absorb this vacancy and for EBITDA to
recover. The table below summarizes the effect of BRAC on our Washington, DC Office Properties segment for square feet leased by
the DOD.
Annual
Expiring
Escalated
Rent Per
Square Foot
Total
Square Feet
Crystal City Skyline
Rosslyn
Square feet to be relet by the General Services
Administration (leases pending)
$
40.05
313,000
313,000
-
Square feet already vacated
26.57
403,000
-
403,000
-
-
Square feet expiring in the future:
First Quarter 2012
Second Quarter 2012
Third Quarter 2012
Total 2012
2013
2014
2015
40.10
39.60
41.47
36.85
32.76
40.09
589,000
171,000
380,000
1,140,000
551,000
171,000
251,000
973,000
38,000
-
119,000
157,000
-
-
10,000
10,000
183,000
330,000
26,000
-
128,000
20,000
43,000
202,000
6,000
140,000
-
-
Total square feet expiring in the future
1,679,000
1,121,000
408,000
150,000
Total square feet subject to BRAC
2,395,000
1,434,000
811,000
150,000
In February 2012, we notified the lender that the Skyline property currently has a 26% vacancy rate, which is expected to increase
due to scheduled lease expirations resulting primarily from the BRAC statute. Based on the projected vacancy and the significant
amount of capital, time and effort to re-tenant the property, we requested that the mortgage loan be placed with the special servicer.
76
Recently Issued Accounting Literature
In May 2011, the Financial Accounting Standards Board (“FASB”) issued Update No. 2011-04, Fair Value Measurements (Topic 820):
Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU No. 2011-04”).
ASU No. 2011-04 provides a uniform framework for fair value measurements and related disclosures between GAAP and International
Financial Reporting Standards (“IFRS”) and requires additional disclosures, including: (i) quantitative information about unobservable inputs
used, a description of the valuation processes used, and a qualitative discussion about the sensitivity of the measurements to changes in the
unobservable inputs, for Level 3 fair value measurements; (ii) fair value of financial instruments not measured at fair value but for which
disclosure of fair value is required, based on their levels in the fair value hierarchy; and (iii) transfers between Level 1 and Level 2 of the fair
value hierarchy. ASU No. 2011-04 is effective for interim and annual periods beginning on or after December 15, 2011. The adoption of
this update on January 1, 2012 is not expected to have a material impact on our consolidated financial statements.
In June 2011, the FASB issued Update No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income
(“ASU No. 2011-05”). ASU No. 2011-05 requires the presentation of net income and other comprehensive income in one continuous
statement or in two separate but consecutive statements. ASU No. 2011-05 is effective for interim and annual periods beginning on or after
December 15, 2011, with early adoption permitted. The Company early adopted this guidance as of December 31, 2011, and has presented
the Consolidated Statements of Comprehensive Income as a separate financial statement.
In September 2011, the FASB issued Update No. 2011-09, Compensation – Retirement Benefits (Topic 715): Disclosures About an
Employer’s Participation in a Multiemployer Plan (“ASU No. 2011-09”). ASU No. 2011-09 requires enhanced disclosures about an entity’s
participation in multiemployer plans that offer pension and other postretirement benefits. ASU No. 2011-09 became effective for interim and
annual periods ending on or after December 15, 2011. The adoption of this update on December 31, 2011 did not have a material impact on
our consolidated financial statements.
Critical Accounting Policies
In preparing the consolidated financial statements we have made estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates. Set forth below is a summary of the accounting policies that we believe are critical to the
preparation of our consolidated financial statements. The summary should be read in conjunction with the more complete discussion of our
accounting policies included in Note 2 to the consolidated financial statements in this Annual Report on Form 10-K.
Real Estate
Real estate is carried at cost, net of accumulated depreciation and amortization. As of December 31, 2011 and 2010, the carrying
amounts of real estate, net of accumulated depreciation, were $14.5 billion and $14.7 billion, respectively. Maintenance and repairs are
expensed as incurred. Depreciation requires an estimate by management of the useful life of each property and improvement as well as an
allocation of the costs associated with a property to its various components. If we do not allocate these costs appropriately or incorrectly
estimate the useful lives of our real estate, depreciation expense may be misstated. As real estate is undergoing development activities, all
property operating expenses directly associated with and attributable to, the development and construction of a project, including interest
expense, are capitalized to the cost of real property to the extent we believe such costs are recoverable through the value of the property. The
capitalization period begins when development activities are underway and ends when the project is substantially complete. General and
administrative costs are expensed as incurred.
Upon the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, identified
intangibles such as acquired above and below-market leases and acquired in-place leases and tenant relationships) and acquired liabilities and
we allocate purchase price based on these assessments. We assess fair value based on estimated cash flow projections that utilize appropriate
discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors, including
historical operating results, known trends and market/economic conditions.
Our properties, including any related intangible assets, are individually reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment exists when the carrying amount of an asset exceeds
the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis. An impairment loss is measured
based on the excess of the property’s carrying amount over its estimated fair value. Impairment analyses are based on our current plans,
intended holding periods and available market information at the time the analyses are prepared. If our estimates of the projected future cash
flows, anticipated holding periods, or market conditions change, our evaluation of impairment losses may be different and such differences
could be material to our consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on
assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. Plans to hold
properties over longer periods decrease the likelihood of recording impairment losses.
77
Critical Accounting Policies – continued
Identified Intangibles
As of December 31, 2011 and 2010, the carrying amounts of identified intangible assets (including acquired above-market leases,
tenant relationships and acquired in-place leases) were $319,704,000 and $346,157,000, respectively. The carrying amounts of
identified intangible liabilities, a component of “deferred credit” on our consolidated balance sheets, were $467,187,000 and
$521,372,000, respectively. Identified intangibles are recorded at their estimated fair value, separate and apart from goodwill.
Identified intangibles that are determined to have finite lives are amortized over the period in which they are expected to contribute
directly or indirectly to the future cash flows of the property or business acquired. Intangible assets that are subject to amortization are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is measured based on the excess of the carrying amount of the identified intangible over its estimated fair value. If
intangible assets are impaired or estimated useful lives change, the impact to our consolidated financial statements could be material.
Mezzanine Loans Receivable
As of December 31, 2011 and 2010, the carrying amounts of mezzanine loans receivable were $133,948,000 and $202,412,000,
respectively. We invest in mezzanine loans of entities that have significant real estate assets. These investments, which are
subordinate to the mortgage loans secured by the real property, are generally secured by pledges of the equity interests of the entities
owning the underlying real estate. We record these investments at the stated principal amount net of any unamortized discount or
premium. We accrete or amortize any discount or premium over the life of the related receivable utilizing the effective interest
method or straight-line method, if the result is not materially different. We evaluate the collectibility of both interest and principal of
each of our loans whenever events or changes in circumstances indicate such amounts may not be recoverable. A loan is impaired
when it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a loan is
impaired, the amount of the loss accrual is calculated by comparing the carrying amount of the investment to the present value of
expected future cash flows discounted at the loan’s effective interest rate, or as a practical expedient, to the value of the collateral if
the loan is collateral dependent. If our estimates of the collectability of both interest and principal or the fair value of our loans change
based on market conditions or otherwise, our evaluation of impairment losses may be different and such differences could be material
to our consolidated financial statements.
Partially Owned Entities
As of December 31, 2011 and 2010, the carrying amounts of investments in partially owned entities, including Toys “R” Us, was
$1.7 billion and $1.4 billion, respectively. In determining whether we have a controlling interest in a partially owned entity and the
requirement to consolidate the accounts of that entity, we consider factors such as ownership interest, board representation,
management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members
as well as whether the entity is a variable interest entity in which we have the power over significant activities of the entity and the
obligation to absorb losses or receive benefits that could potentially be significant to the entity. We account for investments on the
equity method when the requirements for consolidation are not met and we have significant influence over the operations of the
investee. Equity method investments are initially recorded at cost and subsequently adjusted for our share of net income or loss and
cash contributions and distributions each period. Investments that do not qualify for consolidation or equity method accounting are
accounted for on the cost method.
Investments in partially owned entities are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment loss is measured based on the excess of the carrying amount of an
investment over its estimated fair value. Impairment analyses are based on current plans, intended holding periods and available
information at the time the analyses are prepared. The ultimate realization of our investments in partially owned entities is dependent
on a number of factors, including the performance of each investment and market conditions. If our estimates of the projected future
cash flows, the nature of development activities for properties for which such activities are planned and the estimated fair value of the
investment change based on market conditions or otherwise, our evaluation of impairment losses may be different and such
differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is subjective and is
based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from
actual results.
78
Critical Accounting Policies – continued
Allowance For Doubtful Accounts
We periodically evaluate the collectability of amounts due from tenants and maintain an allowance for doubtful accounts
($43,241,000 and $62,979,000 as of December 31, 2011 and 2010) for estimated losses resulting from the inability of tenants to make
required payments under their lease agreements. We also maintain an allowance for receivables arising from the straight-lining of
rents ($4,046,000 and $7,316,000 as of December 31, 2011 and 2010, respectively). This receivable arises from earnings recognized
in excess of amounts currently due under the lease agreements. Management exercises judgment in establishing these allowances and
considers payment history and current credit status in developing these estimates. These estimates may differ from actual results,
which could be material to our consolidated financial statements.
Revenue Recognition
We have the following revenue sources and revenue recognition policies:
• Base Rent — income arising from tenant leases. These rents are recognized over the non-cancelable term of the related
leases on a straight-line basis which includes the effects of rent steps and rent abatements under the leases. We commence
rental revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready
for its intended use. In addition, in circumstances where we provide a tenant improvement allowance for improvements
that are owned by the tenant, we recognize the allowance as a reduction of rental revenue on a straight-line basis over the
term of the lease.
• Percentage Rent — income arising from retail tenant leases that is contingent upon tenant sales exceeding defined thresholds.
These rents are recognized only after the contingency has been removed (i.e., when tenant sales thresholds have been
achieved).
• Hotel Revenue — income arising from the operation of the Hotel Pennsylvania which consists of rooms revenue, food and
beverage revenue, and banquet revenue. Income is recognized when rooms are occupied. Food and beverage and banquet
revenue are recognized when the services have been rendered.
• Trade Shows Revenue — income arising from the operation of trade shows, including rentals of booths. This revenue is
recognized when the trade shows have occurred.
• Expense Reimbursements — revenue arising from tenant leases which provide for the recovery of all or a portion of the
operating expenses and real estate taxes of the respective property. This revenue is accrued in the same periods as the
expenses are incurred.
• Management, Leasing and Other Fees — income arising from contractual agreements with third parties or with partially
owned entities. This revenue is recognized as the related services are performed under the respective agreements.
• Cleveland Medical Mart — revenue arising from the development of the Cleveland Medical Mart. This revenue is recognized
as the related services are performed under the respective agreements using the criteria set forth in ASC 605-25, Multiple
Element Arrangements, as we are providing development, marketing, leasing, and other property management services.
Before we recognize revenue, we assess, among other things, its collectibility. If our assessment of the collectibility of revenue
changes, the impact on our consolidated financial statements could be material.
Income Taxes
We operate in a manner intended to enable us to continue to qualify as a Real Estate Investment Trust (“REIT”) under Sections
856-860 of the Internal Revenue Code of 1986, as amended. Under those sections, a REIT which distributes at least 90% of its REIT
taxable income as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion
of its taxable income which is distributed to its shareholders. We distribute to our shareholders 100% of our taxable income.
Therefore, no provision for Federal income taxes is required. If we fail to distribute the required amount of income to our
shareholders, or fail to meet other REIT requirements, we may fail to qualify as a REIT which may result in substantial adverse tax
consequences.
79
Net Income and EBITDA by Segment for the Years Ended December 31, 2011, 2010 and 2009
(Amounts in thousands)
For the Year Ended December 31, 2011
$
Total
2,157,938 $
41,431
New York Washington, DC
Office
Office
Retail
Merchandise
Mart
Toys
783,438 $
25,720
558,256 $
(721)
424,646 $
16,319
208,059 $
(2,680)
Property rentals
Straight-line rent adjustments
Amortization of acquired below-
market leases, net
Total rentals
Tenant expense reimbursements
Cleveland Medical Mart development
project
Fee and other income:
BMS cleaning fees
Management and leasing fees
Lease termination fees
Other
Total revenues
Operating expenses
Depreciation and amortization
General and administrative
Cleveland Medical Mart development
project
Tenant buy-outs, impairment losses and
other acquisition related costs
Total expenses
Operating income (loss)
Income applicable to Toys
Income (loss) from partially owned
entities
Income from Real Estate Fund
Interest and other investment
income (loss), net
Interest and debt expense
Net gain on disposition of wholly
owned and partially owned assets
Income (loss) before income taxes
Income tax expense
Income (loss) from continuing
operations
Income from discontinued operations
Net income
Less:
Net (income) loss attributable to
noncontrolling interests in
consolidated subsidiaries
Net (income) attributable to
noncontrolling interests in the
Operating Partnership, including
unit distributions
Net income (loss) attributable to
Vornado
Interest and debt expense(2)
Depreciation and amortization(2)
Income tax expense (benefit)(2)
EBITDA(1)
____________________
See notes on page 83.
62,442
2,261,811
349,420
31,547
840,705
140,038
2,088
559,623
36,849
23,751
464,716
150,338
38
205,417
11,602
154,080
-
-
-
154,080
61,754
20,103
16,395
52,102
95,452
7,394
11,539
22,189
2,915,665
1,091,597
553,811
209,981
145,824
58,299
2,059,512
856,153
48,540
71,770
22,886
1,117,317
485,731
186,765
18,815
-
-
691,311
426,006
-
(12,559)
-
148,826
(544,015)
642
(138,336)
15,134
619,294
(24,827)
-
275,753
(2,084)
594,467
145,533
740,000
273,669
563
274,232
-
12,361
3,794
20,650
633,277
200,677
160,729
26,380
-
3,071
767
5,966
624,858
205,385
114,360
28,098
-
342
295
3,558
375,294
132,470
41,094
29,996
-
-
145,824
-
24,146
28,228
387,786
245,491
-
(6,381)
-
199
(120,724)
-
118,585
(2,927)
115,658
46,466
162,124
371,989
252,869
-
4,006
-
(29)
(91,895)
4,278
169,229
(34)
169,195
4,000
173,195
377,612
(2,318)
-
455
-
43
(36,873)
-
(38,693)
(2,237)
(40,930)
94,504
53,574
Other(3)
183,539
2,793
- $
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,018
191,350
10,593
-
(33,698)
(3,065)
-
(261)
164,919
67,334
50,863
106,692
-
-
-
-
48,540
5,925
230,814
(65,895)
-
-
-
-
-
-
48,540
-
48,540
-
48,540
86,249
22,886
147,971
(156,187)
10,856
45,880
(17,545)
28,335
-
28,335
(21,786)
(10,042)
-
237
(55,912)
-
-
-
-
-
-
(11,981)
-
(55,912)
662,302
797,920
777,421
4,812
2,242,455 $
264,190
150,627
201,122
2,204
618,143 $
$
162,124
134,270
181,560
173,432
96,644
117,716
53,574
40,916
46,725
48,540
157,135
134,967
3,123
481,077 $
34
387,826 $
2,237
(1,132)
143,452 $ 339,510 $
(39,558)
218,328
95,331
(1,654)
272,447
80
Net Income and EBITDA by Segment for the Years Ended December 31, 2011, 2010 and 2009 - continued
(Amounts in thousands)
For the Year Ended December 31, 2010
$
Total
2,099,158 $
73,007
New York Washington, DC
Office
Office
Retail
Merchandise
Mart
Toys
773,996 $
34,197
566,041 $
5,849
390,068 $
28,604
199,323 $
382
Property rentals
Straight-line rent adjustments
Amortization of acquired below-
market leases, net
Total rentals
Tenant expense reimbursements
Fee and other income:
BMS cleaning fees
Management and leasing fees
Lease termination fees
Other
Total revenues
Operating expenses
Depreciation and amortization
General and administrative
Tenant buy-outs, impairment losses and
other acquisition related costs
Total expenses
Operating income (loss)
Income applicable to Toys
Income (loss) from partially owned
entities
(Loss) from Real Estate Fund
Interest and other investment
income, net
Interest and debt expense
Net gain (loss) on extinguishment
of debt
Net gain on disposition of wholly
owned and partially owned assets
Income (loss) before income taxes
Income tax expense
Income (loss) from continuing
operations
(Loss) income from discontinued
operations
Net income (loss)
Less:
Net (income) loss attributable to
noncontrolling interests in
consolidated subsidiaries
Net (income) attributable to
noncontrolling interests in the
Operating Partnership, including
unit distributions
Net income (loss) attributable to
Vornado
Interest and debt expense(2)
Depreciation and amortization(2)
Income tax (benefit) expense (2)
EBITDA(1)
_______________________
See notes on page 83.
65,542
2,237,707
355,616
58,053
20,117
14,826
54,362
2,740,681
1,082,844
522,022
213,949
129,458
1,948,273
792,408
71,624
22,438
(303)
36,164
844,357
137,412
88,664
6,192
4,270
22,283
1,103,178
469,495
176,534
18,578
2,326
574,216
51,963
21,470
440,142
144,224
-
15,934
1,148
21,427
664,688
213,935
142,720
25,464
-
1,029
7,641
3,674
596,710
220,090
108,156
29,610
(75)
199,630
11,059
-
156
467
3,838
215,150
114,161
40,130
26,720
-
-
72,500
20,000
664,607
438,571
-
(6,354)
-
382,119
282,569
-
(564)
-
430,356
166,354
-
9,401
-
201,011
14,139
-
(179)
-
235,315
(560,052)
608
(132,279)
157
(130,540)
180
(85,063)
47
(37,932)
94,789
-
-
105,571
-
Other(3)
169,730
3,975
- $
-
-
-
-
-
-
-
-
-
-
-
-
5,657
179,362
10,958
(30,611)
(3,194)
1,300
3,140
160,955
65,163
54,482
113,577
-
-
-
71,624
36,958
270,180
(109,225)
-
-
-
-
-
-
20,134
(303)
234,323
(174,238)
(10,782)
25,925
(14,166)
(18,283)
81,432
737,651
(22,476)
-
300,546
(2,167)
54,742
206,364
(1,816)
-
196,443
(37)
765
(23,160)
(173)
-
71,624
-
715,175
298,379
204,548
196,406
(23,333)
71,624
(32,449)
(7,144)
708,031
168
298,547
(4,481)
200,067
2,453
198,859
(5,284)
(28,617)
-
71,624
-
(32,449)
-
-
-
5,417
-
(55,228)
(28,617)
61,379
51,064
71,624
177,272
131,284
(45,418)
84,058 $ 334,762 $
232
(82,260)
234,395
102,955
17,919
273,009
(4,920)
(9,559)
-
(778)
(55,228)
-
-
-
647,883
828,082
729,426
(23,036)
2,182,355 $
288,988
126,209
170,505
2,167
587,869 $
$
200,067
136,174
159,283
198,081
92,653
114,335
2,027
497,551 $
37
405,106 $
81
Net Income and EBITDA by Segment for the Years Ended December 31, 2011, 2010 and 2009 - continued
(Amounts in thousands)
For the Year Ended December 31, 2009
$
Total
1,989,169 $
89,405
New York Washington, DC
Office
Office
Retail
Merchandise
Mart
Toys
757,372 $
36,832
526,683 $
22,683
354,397 $
26,943
191,485 $
2,478
Other(3)
159,232
469
- $
-
Property rentals
Straight-line rent adjustments
Amortization of acquired below-
market leases, net
Total rentals
Tenant expense reimbursements
Fee and other income:
BMS cleaning fees
Management and leasing fees
Lease termination fees
Other
Total revenues
Operating expenses
Depreciation and amortization
General and administrative
Tenant buy-outs, impairment losses and
other acquisition related costs
Total expenses
Operating income (loss)
Income applicable to Toys
(Loss) income from partially owned
entities
Interest and other investment (loss)
income, net
Interest and debt expense
Net (loss) gain on extinguishment
of debt
Net gain on disposition of wholly
owned and partially owned assets
Income (loss) before income taxes
Income tax expense
Income (loss) from continuing
operations
Income (loss) from discontinued operations
Net income (loss)
Less:
Net loss (income) attributable to
noncontrolling interests in
consolidated subsidiaries
Net (income) attributable to
noncontrolling interests in the
Operating Partnership, including
unit distributions
Net income (loss) attributable to
Vornado
Interest and debt expense(2)
Depreciation and amortization(2)
Income tax expense (benefit)(2)
EBITDA(1)
___________________________
See notes on the following page.
70,401
2,148,975
351,290
53,824
11,456
4,886
85,160
2,655,591
1,050,545
519,534
230,584
73,763
1,874,426
781,165
92,300
39,474
833,678
136,368
75,549
4,211
1,840
18,868
1,070,514
451,977
173,433
22,662
-
648,072
422,442
-
3,452
552,818
60,620
-
8,183
2,224
47,745
671,590
220,333
142,415
26,205
24,875
413,828
257,762
-
22,095
403,435
132,385
-
1,731
464
2,565
540,580
200,457
99,217
30,339
9,589
339,602
200,978
-
89
194,052
12,079
-
88
219
7,528
213,966
113,078
41,587
30,749
-
185,414
28,552
-
(19,910)
5,817
4,850
4,728
151
(116,350)
(617,768)
876
(133,647)
786
(128,039)
69
(88,844)
95
(38,009)
(25,915)
5,641
99,163
(20,642)
78,521
49,929
128,450
-
-
769
-
-
295,488
(1,332)
294,156
945
295,101
-
135,359
(1,482)
133,877
52,308
186,185
-
117,700
(319)
117,381
(3,430)
113,951
-
(9,211)
(2,140)
(11,351)
106
(11,245)
-
92,300
-
92,300
-
92,300
-
-
-
-
-
-
-
-
-
-
-
-
-
-
92,300
-
-
-
-
5,291
164,992
9,838
(21,725)
(2,757)
139
8,454
158,941
64,700
62,882
120,629
39,299
287,510
(128,569)
-
(35,456)
(118,176)
(229,229)
(26,684)
5,641
(532,473)
(15,369)
(547,842)
-
(547,842)
2,839
(9,098)
-
915
(25,120)
-
-
-
-
-
-
11,022
-
(25,120)
106,169
826,827
728,815
10,193
1,672,004 $
286,003
126,968
168,517
1,332
582,820 $
$
186,185
132,610
152,747
1,590
473,132 $
114,866
95,990
105,903
319
317,078 $
(11,245)
52,862
56,702
2,208
(561,940)
92,300
291,007
127,390
112,719
132,227
17,929
(13,185)
100,527 $ 338,732 $ (140,285)
82
Net Income and EBITDA by Segment for the Years Ended December 31, 2011, 2010 and 2009 - continued
Notes to preceding tabular information:
(1) EBITDA represents “Earnings Before Interest, Taxes, Depreciation and Amortization.” We consider EBITDA a supplemental
measure for making decisions and assessing the unlevered performance of our segments as it relates to the total return on assets as
opposed to the levered return on equity. As properties are bought and sold based on a multiple of EBITDA, we utilize these
measures to make investment decisions as well as to compare the performance of our assets to that of our peers. EBITDA should
not be considered a substitute for net income. EBITDA may not be comparable to similarly titled measures employed by other
companies.
(2) Interest and debt expense, depreciation and amortization and income tax (benefit) expense in the reconciliation of our net income
(loss) to EBITDA includes our share of these items from partially owned entities.
(3) The tables below provide information about EBITDA from certain investments that are included in the “other” column of the
preceding EBITDA by segment reconciliations. The totals for each of the columns below agree to the total EBITDA for the
“other “ column in the preceding EBITDA by segment reconciliations.
(Amounts in thousands)
Our share of Real Estate Fund:
Income before net realized/unrealized gains
Net unrealized gains
Net realized gains
Carried interest accrual
Total
Alexander's
LNR (acquired in July 2010)
Lexington Realty Trust ("Lexington") (1)
555 California Street
Hotel Pennsylvania
Other investments
Corporate general and administrative expenses (2)
Investment income and other, net (2)
Mezzanine loans loss reversal (accrual) and net gain on disposition
Income from the mark-to-market of J.C. Penney derivative position
Net gain from Suffolk Downs' sale of a partial interest
Net gain on sale of condominiums
Acquisition costs
Real Estate Fund placement fees
Net loss on extinguishment of debt
Non-cash asset write-downs:
Investment in Lexington
Marketable equity securities
Real estate - primarily development projects:
Wholly owned entities
Partially owned entities
Write-off of unamortized costs from the voluntary surrender of equity awards
Net income attributable to noncontrolling interests in the Operating Partnership,
including unit distributions
For the Year Ended December 31,
2010
2011
2009
$
4,205 $
2,999
1,348
736
9,288
61,080
47,614
44,539
44,724
30,135
33,529
270,909
(85,922)
52,405
82,744
12,984
12,525
5,884
(5,925)
(3,451)
-
-
-
$
503
-
-
-
503
57,425
6,116
55,304
46,782
23,763
30,463
220,356
(90,343)
65,499
53,100
130,153
-
3,149
(6,945)
(5,937)
(10,782)
-
-
-
(13,794)
-
(30,013)
-
-
-
-
-
-
-
81,703
-
50,024
44,757
15,108
11,070
202,662
(79,843)
78,593
(190,738)
-
-
648
-
-
(26,684)
(19,121)
(3,361)
(39,299)
(17,820)
(20,202)
(55,912)
272,447 $
(55,228)
273,009 $
(25,120)
(140,285)
$
(1)
Includes net gains of $9,760 and $13,710 in 2011 and 2010, respectively, resulting from Lexington's stock issuances.
(2)
The amounts in these captions (for this table only) exclude the mark-to-market of our deferred compensation plan assets and offsetting liability.
83
Net Income and EBITDA by Segment for the Years Ended December 31, 2011, 2010 and 2009 - continued
Below is a summary of the percentages of EBITDA by geographic region (excluding Toys, discontinued operations and other
gains and losses that affect comparability), from our New York Office, Washington DC Office, Retail and Merchandise Mart
segments.
For the Year Ended December 31,
2010
2011
2009
Region:
New York City metropolitan area
Washington, DC / Northern Virginia metropolitan area
California
Chicago
Puerto Rico
Other geographies
61%
29%
2%
4%
2%
2%
100%
61%
31%
2%
4%
1%
1%
100%
61%
30%
1%
4%
2%
2%
100%
84
Results of Operations – Year Ended December 31, 2011 Compared to December 31, 2010
Revenues
Our revenues, which consist of property rentals, tenant expense reimbursements, hotel revenues, trade shows revenues,
amortization of acquired below-market leases, net of above-market leases and fee income, were $2,915,665,000 for the year ended
December 31, 2011, compared to $2,740,681,000 in the prior year, an increase of $174,984,000, of which $154,080,000 relates to the
Cleveland Medical Mart development project. Below are the details of the increase (decrease) by segment:
(Amounts in thousands)
Increase (decrease) due to:
Property rentals:
Acquisitions, sale of partial interests
and other
Development projects placed into service
Hotel Pennsylvania
Trade Shows
Amortization of acquired below-market
leases, net
Leasing activity (see page 74)
Tenant expense reimbursements:
Acquisitions/development, sale of partial
interests and other
Operations
Cleveland Medical Mart development
project
Fee and other income:
BMS cleaning fees
Management and leasing fees
Lease cancellation fee income
Other
Total
New York
Office
Washington, DC
Office
Merchandise
Retail
Mart
Other
$
$
(10,242)
5,513
10,006
7,722
(3,100)
14,205
24,104
$
(3,519)
-
-
-
(4,617)
4,484
(3,652)
(26,936) (1) $
6,100
-
-
15,369 (2) $
(587)
-
-
(238)
6,481
(14,593)
2,281
7,511
24,574
$
-
-
-
7,722
113
(2,048)
5,787
4,844
-
10,006
-
(639)
(2,223)
11,988
(5,204)
(992)
(6,196)
4,305
(1,679)
2,626
(13,109) (1)
(2,005)
(15,114)
3,926 (2)
2,188
6,114
-
543
543
(326)
(39)
(365)
154,080 (3)
-
-
-
154,080 (3)
-
3,701
(14)
1,569
(2,260)
2,996
6,788
1,202
7,269
(94)
15,165
-
(3,573) (5)
2,646
(777)
(1,704)
-
2,042
(6,874)
2,292
(2,540)
-
186
(172)
(280)
(266)
(3,087) (4)
129
(1,300)
(3,401)
(7,659)
Total increase (decrease) in revenues
$
174,984
$
14,139
$
(31,411)
$
28,148
$
160,144
$
3,964
(1) Primarily from the sale of a partial interest in the Warner Building and 1101 17th Street.
(2) Primarily from the acquisition of the remaining 55% interest we did not previously own in the San Jose Strip Shopping Center.
(3) This income is offset by $145,824 of development costs expensed in the period. See note (7) on page 86.
(4) Primarily from the elimination of inter-company fees from operating segments upon consolidation.
(5) Primarily from leasing fees in the prior year in connection with our management of a development project.
85
Results of Operations – Year Ended December 31, 2011 Compared to December 31, 2010 - continued
Expenses
Our expenses, which consist primarily of operating, depreciation and amortization and general and administrative expenses, were
$2,059,512,000 for the year ended December 31, 2011, compared to $1,948,273,000 in the prior year, an increase of $111,239,000,
which includes $145,824,000 related to the Cleveland Medical Mart development project. Below are the details of the increase
(decrease) by segment:
(Amounts in thousands)
Increase (decrease) due to:
Operating:
Acquisitions, sale of partial interests
and other
Development projects placed into service
Non-reimbursable expenses, including
bad-debt reserves
Hotel Pennsylvania
Trade Shows
BMS expenses
Operations
Depreciation and amortization:
Acquisitions/development, sale of partial
interests and other
Operations
Total
New York
Office
Washington, DC
Office
Merchandise
Retail
Mart
Other
$
(374)
1,006
$
$
-
-
(14,123) (1) $
(248)
14,075 (2) $
1,254
$
-
-
(326)
-
(20,997) (3)
3,330
3,631
3,262
18,895
8,753
3,029
-
-
6,349
6,858
16,236
(1,374)
-
-
-
2,487
(13,258)
(31,950) (3)
-
-
-
1,916
(14,705)
9,298
-
3,631
-
5,380
18,309
-
3,330
-
(3,087)
2,254
2,171
(4,466)
36,255
31,789
-
10,231
10,231
(10,261) (1)
28,270 (4)
18,009
5,795 (2)
409
6,204
-
964
964
-
(3,619)
(3,619)
General and administrative:
Mark-to-market of deferred compensation
plan liability (5)
Real Estate Fund placement fees
Operations
Cleveland Medical Mart development
project
Tenant buy-outs, impairment losses and
other acquisition related costs
(6,391)
(3,031)
5,454
(3,968)
145,824 (7)
(71,159)
-
-
237
237
-
-
-
-
916
916
-
-
(1,512)
(1,512)
-
-
3,276 (6)
3,276
(6,391)
(3,031)
2,537
(6,885)
-
-
145,824 (7)
-
-
(48,354) (8)
8,228
(31,033) (9)
Total increase (decrease) in expenses
$
111,239
$
26,704
$
5,667
$
(58,367)
$
176,601
$
(39,366)
(1) Primarily from the sale of a partial interest in the Warner Building and 1101 17th Street.
(2) Primarily from the acquisition of the remaining 55% interest we did not previously own in the San Jose Strip Shopping Center.
(3)
(4)
(5)
Includes a $23,521 reversal for the Stop & Shop accounts receivable reserve.
Includes $25,000 of depreciation expense on 1851 South Bell Street, which will be taken out of service for redevelopment in 2012.
This decrease in expense is entirely offset by a corresponding decrease in income from the mark-to-market of the deferred compensation plan
assets, a component of “interest and other investment income (loss), net” on our consolidated statements of income.
(6)
Includes $4,226 of restructuring costs.
(7) This expense is entirely offset by development revenue in the year. See note (3) on page 85.
(8)
Primarily from a $64,500 non-cash impairment loss on the Springfield Mall in the prior year, partially offset by tenant buy-out costs in the
current year.
(9) Primarily from $30,013 of impairment losses in the prior year on condominium units held for sale.
86
Results of Operations – Year Ended December 31, 2011 Compared to December 31, 2010 - continued
Income Applicable to Toys
In the year ended December 31, 2011, we recognized net income of $48,540,000 from our investment in Toys, comprised of
$39,592,000 for our 32.7% share of Toys’ net income ($38,460,000 before our share of Toys’ income tax benefit) and $8,948,000 of
interest and other income.
In the year ended December 31, 2010, we recognized net income of $71,624,000 from our investment in Toys, comprised of
$61,819,000 for our 32.7% share of Toys’ net income ($16,401,000 before our share of Toys’ income tax benefit) and $9,805,000 of
interest and other income.
Income (Loss) from Partially Owned Entities
Summarized below are the components of income (loss) from partially owned entities for the years ended December 31, 2011
and 2010.
(Amounts in thousands)
Equity in Net Income (Loss):
Alexander's - 32.4% interest
Lexington - 12.0% interest in 2011 and 12.8% interest in 2010 (1)
LNR - 26.2% interest (acquired in July 2010) (2)
India real estate ventures - 4.0% to 36.5% interest (3)
Partially owned office buildings:
280 Park Avenue - 49.5% interest (acquired in May 2011)
West 57th Street Properties - 50.0% interest (4)
Rosslyn Plaza - 43.7% to 50.4% interest
One Park Avenue - 30.3% interest (acquired in March 2011)
Warner Building and 1101 17th Street - 55.0% interest (deconsolidated in October
2010 upon sale of a 45.0% interest) (5)
Other partially owned office buildings
Other equity method investments:
Verde Realty Operating Partnership - 8.3% interest
Independence Plaza - 51.0% interest (acquired in June 2011)
Downtown Crossing, Boston - 50.0% interest
Monmouth Mall - 50.0% interest
Other equity method investments (6)
For the Year Ended
December 31,
2011
2010
$
$
34,128
8,351
58,786
(14,881)
(18,079)
876
2,193
(1,142)
(16,135)
10,017
1,661
2,457
(1,461)
2,556
2,443
71,770
$
$
29,184
11,018
1,973
2,581
-
(10,990)
(2,419)
-
72
4,436
(537)
-
(1,155)
1,952
(13,677)
22,438
(1) Includes net gains of $9,760 and $13,710 in 2011 and 2010, respectively, resulting from Lexington's stock issuances.
(2) 2011 includes $27,377 of income comprised of (i) $12,380 for an income tax benefit, (ii) $8,977 of a tax settlement gain, and (iii) $6,020 of
net gains from asset sales.
(3) 2011 includes $13,794 for our share of an impairment loss.
(4) 2010 includes $11,481 of impairment losses.
(5) 2011 includes $9,022 for our share of expense, primarily for straight-line rent reserves and the write-off of tenant-improvements in
connection with a tenant's bankruptcy at the Warner Building.
(6) 2011 includes a $12,525 net gain from Suffolk Downs' sale of a partial interest.
Income (loss) from Real Estate Fund
In the year ended December 31, 2011, we recognized $22,886,000 of income from the Fund, including $11,995,000 of net
unrealized gains from the mark-to-market of investments and $5,391,000 of net realized gains from the disposition of two
investments. Of the $22,886,000, $13,598,000 was attributable to noncontrolling interests. Accordingly, our share of the Fund’s
income was $9,288,000. In addition, we recognized $2,695,000 of management, leasing and development fees which are included as
a component of “fee and other income,” and incurred $3,451,000 of placement fees in connection with the February 2011 closing of
the Fund, which is included in “general and administrative” expenses.
In the year ended December 31, 2010, we recognized a $303,000 loss from the Fund.
87
Results of Operations – Year Ended December 31, 2011 Compared to December 31, 2010 - continued
Interest and Other Investment Income (Loss), net
Interest and other investment income (loss), net (comprised of the mark-to-market of derivative positions in marketable equity
securities, interest income on mezzanine loans receivable, other interest income and dividend income) was $148,826,000 in the year
ended December 31, 2011, compared to $235,315,000 in the prior year, a decrease of $86,489,000. This decrease resulted from:
(Amounts in thousands)
J.C. Penney derivative position (mark-to-market gain of $12,984 in 2011, compared to $130,153 in 2010)
$
(117,169)
Mezzanine loans ($82,744 loss reversal and net gain on disposition in 2011, compared to $53,100
loss reversal in 2010)
Decrease in the value of investments in our deferred compensation plan (offset by a corresponding
decrease in the liability for plan assets in general and administrative expenses)
Other, net (primarily dividends and interest on marketable securities and mezzanine loans)
29,644
(6,391)
7,427
(86,489)
$
Interest and Debt Expense
Interest and debt expense was $544,015,000 for the year ended December 31, 2011, compared to $560,052,000 in the prior year, a
decrease of $16,037,000. This decrease was primarily due to savings of (i) $22,865,000 applicable to the repurchase and retirement of
convertible senior debentures and repayment of senior unsecured notes, (ii) $18,157,000 from the repayment of the Springfield Mall
mortgage at a discount in December 2010 and (iii) $14,856,000 from the deconsolidation of the Warner Building resulting from the
sale of a 45% interest in October 2010, partially offset by (iv) $17,204,000 from the issuance of $660,000,000 of cross-collateralized
debt secured by 40 of our strip shopping centers in August 2010, (v) $14,777,000 from the financing of 2121 Crystal Drive and Two
Penn Plaza in the first quarter of 2011, (vi) $5,057,000 from the issuance of $500,000,000 of senior unsecured notes in March 2010
and (vii) $3,854,000 from the consolidation of the San Jose Shopping Center resulting from the October 2010 acquisition of the 55%
interest we did not previously own.
Net Gain (Loss) on Extinguishment of Debt
In the year ended December 31, 2010, we recognized a $94,789,000 net gain on the extinguishment of debt (primarily from our
acquisition of the mortgage loan secured by the Springfield Mall).
Net Gain on Disposition of Wholly Owned and Partially Owned Assets
In the year ended December 31, 2011, we recognized a $15,134,000 net gain on disposition of wholly owned and partially owned
assets (primarily from the sale of residential condominiums and marketable securities), compared to a $81,432,000 net gain in the
prior year (primarily from the sale of a 45% interest in the Warner Building and sales of marketable securities).
Income Tax Expense
Income tax expense was $24,827,000 in the year ended December 31, 2011, compared to $22,476,000 in the prior year, an
increase of $2,351,000. This increase resulted primarily from higher taxable income of our taxable REIT subsidiaries.
88
Results of Operations – Year Ended December 31, 2011 Compared to December 31, 2010 - continued
Income (Loss) from Discontinued Operations
The table below sets forth the combined results of assets related to discontinued operations for the years ended December 31,
2011 and 2010.
(Amounts in thousands)
Total revenues
Total expenses
Net gain on extinguishment of High Point debt
Net gain on sale of 1140 Connecticut Avenue and 1227 25th
Street
Net gain on sales of other real estate
Impairment losses and litigation loss accrual
Income (loss) from discontinued operations
For the Year Ended
December 31,
2011
2010
$
$
45,745
29,943
15,802
83,907
45,862
5,761
(5,799)
145,533
$
$
82,917
77,511
5,406
-
-
2,506
(15,056)
(7,144)
Net (Income) Loss Attributable to Noncontrolling Interests in Consolidated Subsidiaries
Net income attributable to noncontrolling interests in consolidated subsidiaries was $21,786,000 in the year ended December 31,
2011, compared to $4,920,000 in the prior year, an increase of $16,866,000. This resulted primarily from a $14,404,000 increase in
income allocated to the noncontrolling interests of our Real Estate Fund.
Net Income Attributable to Noncontrolling Interests in the Operating Partnership, including Unit Distributions
Net income attributable to noncontrolling interests in the Operating Partnership, including unit distributions for the years ended
December 31, 2011 and 2010 is primarily comprised of allocations of income to redeemable noncontrolling interests of $41,059,000
and $44,033,000, respectively, and preferred unit distributions of the Operating Partnership of $14,853,000 and $11,195,000
respectively.
Preferred Share Dividends
Preferred share dividends were $65,531,000 for the year ended December 31, 2011, compared to $55,534,000 for the prior year,
an increase of $9,997,000. This increase resulted from the issuance of Series J preferred shares during 2011, partially offset by the
redemption of Series D-10 preferred shares in 2010.
Discount on Preferred Share and Unit Redemptions
In the year ended December 31, 2011, we recognized a $5,000,000 discount from the redemption of 1,000,000 Series D-11
preferred units with a par value of $25.00 per unit, for an aggregate of $20,000,000 in cash, compared to a $4,382,000 discount in the
prior year from the redemption of 1,600,000 Series D-10 preferred shares with a par value of $25.00 per share, for an aggregate of
$35,618,000.
89
Results of Operations – Year Ended December 31, 2011 Compared to December 31, 2010 - continued
Same Store EBITDA
Same store EBITDA represents EBITDA from property level operations which are owned by us in both the current and prior year
reporting periods. Same store EBITDA excludes segment-level overhead expenses, which are expenses that we do not consider to be
property-level expenses, as well as other non-operating items. We present same store EBITDA on both a GAAP basis and a cash
basis, which excludes income from the straight-lining of rents, amortization of below-market leases, net of above-market leases and
other non-cash adjustments. We present these non-GAAP measures to (i) facilitate meaningful comparisons of the operational
performance of our properties and segments, (ii) make decisions on whether to buy, sell or refinance properties, and (iii) compare the
performance of our properties and segments to those of our peers. Same store EBITDA should not be considered as an alternative to
net income or cash flow from operations and may not be comparable to similarly titled measures employed by other companies.
Below are the same store EBITDA results on a GAAP and cash basis for each of our segments for the year ended December 31,
2011, compared to the year ended December 31, 2010.
(Amounts in thousands)
EBITDA for the year ended December 31, 2011
Add-back: non-property level overhead
expenses included above
Less: EBITDA from acquisitions, dispositions
and other non-operating income or expenses
GAAP basis same store EBITDA for the year
ended December 31, 2011
Less: Adjustments for straight-line rents,
amortization of below-market leases, net and other
non-cash adjustments
Cash basis same store EBITDA for the year
ended December 31, 2011
EBITDA for the year ended December 31, 2010
Add-back: non-property level overhead
expenses included above
Less: EBITDA from acquisitions, dispositions
and other non-operating income or expenses
GAAP basis same store EBITDA for the year
ended December 31, 2010
Less: Adjustments for straight-line rents,
amortization of below-market leases, net and other
non-cash adjustments
Cash basis same store EBITDA for the year
ended December 31, 2010
(Decrease) increase in GAAP basis same store EBITDA for
the year ended December 31, 2011 over the
year ended December 31, 2010
Increase in Cash basis same store EBITDA for
the year ended December 31, 2011 over the
year ended December 31, 2010
New York
Office
Washington, DC
Office
Retail
Merchandise
Mart
$
618,143
$
481,077
$
387,826
$
143,452
18,815
26,380
28,098
29,996
(24,778)
(49,513)
(29,197)
(74,557)
612,180
457,944
386,727
98,891
(52,644)
(274)
(27,288)
2,642
559,536
587,869
$
$
457,670
$
359,439
497,551
$
405,106
18,578
25,464
29,610
$
$
101,533
84,058
26,720
6,487
(69,288)
(59,561)
(12,387)
612,934
453,727
375,155
98,391
(63,029)
(4,005)
(37,262)
(307)
549,905
$
449,722
$
337,893
$
98,084
(754)
$
4,217
$
11,572
$
500
9,631
$
7,948
$
21,546
$
3,449
$
$
$
$
$
% (decrease) increase in GAAP basis same store EBITDA
% increase in Cash basis same store EBITDA
(0.1%)
1.8%
0.9%
1.8%
3.1%
6.4%
0.5%
3.5%
90
Results of Operations – Year Ended December 31, 2010 Compared to December 31, 2009
Revenues
Our revenues, which consist of property rentals, tenant expense reimbursements, hotel revenues, trade shows revenues,
amortization of acquired below-market leases, net of above-market leases and fee income, were $2,740,681,000 for the year ended
December 31, 2010, compared to $2,655,591,000 for the year ended December 31, 2009, an increase of $85,090,000. Below are the
details of the increase (decrease) by segment:
(Amounts in thousands)
Increase (decrease) due to:
Property rentals:
Acquisitions and other
Development projects placed into service
Hotel Pennsylvania
Trade Shows
Amortization of acquired below-market
leases, net
Leasing activity (see page 74)
$
Tenant expense reimbursements:
Acquisitions/development
Operations
Fee and other income:
BMS cleaning fees
Management and leasing fees
Lease cancellation fee income
Other
Total
New York
Office
Washington, DC
Office
Merchandise
Retail
Mart
Other
(1,713)
12,716
15,622
5,044
(4,859)
61,922
88,732
1,079
3,247
4,326
4,229
8,661
9,940
(30,798)
(7,968)
$
$
-
-
-
-
(3,310)
13,989
10,679
-
1,044
1,044
13,115
1,981
2,430
3,415
20,941
(6,890)
10,316
-
-
(1,126)
19,098
21,398
(3,236)
(5,421)
(8,657)
-
7,751 (2)
(1,076)
(26,318) (3)
(19,643)
$
$
4,161
2,400
-
-
$
2,064
-
-
5,044
(625)
30,771
36,707
4,564
7,275
11,839
-
(702)
7,177
1,109
7,584
(164)
(1,366)
5,578
-
(1,020)
(1,020)
-
68
248
(3,690) (4)
(3,374)
(1,048)
-
15,622
-
366
(570)
14,370
(249)
1,369
1,120
(8,886) (1)
(437)
1,161
(5,314) (5)
(13,476)
Total increase (decrease) in revenues
$
85,090
$
32,664
$
(6,902)
$
56,130
$
1,184
$
2,014
(1)
Primarily from the elimination of inter-company fees from operating segments upon consolidation. See note (3) on page 92.
(2) Primarily from leasing fees in connection with our management of a development project.
(3) Primarily from income resulting from a forfeited non-refundable purchase deposit in 2009.
(4)
Primarily from income resulting from the surrender and build-out of tenant space in 2009.
(5)
2009 includes $5,402 of income previously deferred resulting from the termination of a lease with a partially owned entity.
91
Results of Operations – Year Ended December 31, 2010 Compared to December 31, 2009 - continued
Expenses
Our expenses, which consist primarily of operating, depreciation and amortization and general and administrative expenses, were
$1,948,273,000 for the year ended December 31, 2010, compared to $1,874,426,000 for the year ended December 31, 2009, an
increase of $73,847,000. Below are the details of the increase (decrease) by segment:
(Amounts in thousands)
Increase (decrease) due to:
Operating:
Acquisitions and other
Development projects placed into service
Hotel Pennsylvania
Trade Shows
Operations
$
Depreciation and amortization:
Acquisitions/development
Operations
General and administrative:
Write-off of unamortized costs from the
voluntary surrender of equity awards (4)
Mark-to-market of deferred compensation
plan liability (5)
Real Estate Fund placement fees
Operations
Tenant buy-outs, impairment losses and
other acquisition related costs
New York
Total
Office
Washington, DC
Office
Merchandise
Retail
Mart
Other
(6,291) $
3,425
11,041
(1,063)
25,187
32,299
$
(4,688)
-
-
-
22,206 (1)
17,518
(682)
3,170
2,488
-
3,101
3,101
$
(3,890)
2,941
-
-
(5,449)
(6,398)
(2,207)
2,512
305
$
1,213
484
-
-
17,936 (2)
19,633
2,132
6,807
8,939
$
1,770
-
-
(1,063)
376
1,083
-
(1,457)
(1,457)
(696)
-
11,041
-
(9,882) (3)
463
(607)
(7,793)
(8,400)
(32,588)
(3,451)
(3,131)
(4,793)
(1,011)
(20,202)
(1,457)
5,937
11,473
(16,635)
-
-
(633)
(4,084)
-
-
2,390
(741)
-
-
4,064
(729)
-
-
(3,018) (6)
(4,029)
(1,457)
5,937
8,670 (7)
(7,052)
55,695
-
(24,875)
62,911 (8)
20,000
(2,341)
Total increase (decrease) in expenses
$
73,847 $
16,535
$
(31,709)
$
90,754
$
15,597
$
(17,330)
(1)
(2)
Results from increases in (i) BMS operating expenses of $13,459, (ii) reimbursable operating expenses of $5,664 and (iii) non-reimbursable
operating expenses of $3,083.
Results from increases in (i) reimbursable operating expenses of $8,121, (ii) bad debt reserves of $8,505, of which $5,300 results from a true-
up of 2009's billings and (iii) non-reimbursable operating expenses of $1,310.
(3) Primarily from the elimination of inter-company fees from operating segments upon consolidation. See note (1) on page 91.
(4)
On March 31, 2009, our nine most senior executives voluntarily surrendered their 2007 and 2008 stock option awards and their 2008 out-
performance plan awards. Accordingly, we recognized $32,588 of expense in the first quarter of 2009, representing the unamortized portion
of these awards.
(5)
This decrease in expense is entirely offset by a corresponding decrease in income from the mark-to-market of the deferred compensation plan
assets, a component of “interest and other investment income (loss), net” on our consolidated statement of income.
(6)
Primarily due to $2,800 of pension plan termination costs in 2009.
(7) Primarily from higher payroll costs and stock-based compensation expense as a result of awards granted in March 2010.
(8)
Results from a $64,500 non-cash impairment loss on the Springfield Mall.
92
Results of Operations – Year Ended December 31, 2010 Compared to December 31, 2009 - continued
Income Applicable to Toys
In the year ended December 31, 2010, we recognized net income of $71,624,000 from our investment in Toys, comprised of
$61,819,000 for our 32.7% share of Toys’ net income ($16,401,000 before our share of Toys’ income tax benefit) and $9,805,000 of
interest and other income.
In the year ended December 31, 2009, we recognized $92,300,000 of income from our investment in Toys, comprised of (i)
$71,601,000 for our 32.7% share of Toys’ net income ($58,416,000 before our share of Toys’ income tax benefit), (ii) $13,946,000 for
our share of income from previously recognized deferred financing cost amortization expense, which we initially recorded as a
reduction of the basis of our investment in Toys, and (iii) $6,753,000 of interest and other income.
Income (Loss) from Partially Owned Entities
Summarized below are the components of income (loss) from partially owned entities for the years ended December 31, 2010
and 2009.
(Amounts in thousands)
Equity in Net Income (Loss):
Alexander's - 32.4% interest (1)
Lexington - 12.8% interest in 2010 and 15.2% interest in 2009 (2)
LNR - 26.2% interest (acquired in July 2010)
India real estate ventures - 4.0% to 36.5% interest
Partially owned office buildings:
West 57th Street Properties - 50.0% interest (3)
Rosslyn Plaza - 43.7% to 50.4% interest
Warner Building and 1101 17th Street - 55.0% interest (deconsolidated in October
2010 upon sale of a 45.0% interest)
Other partially owned office buildings
Other equity method investments:
Monmouth Mall - 50.0% interest
Other equity method investments (6)
Verde Realty Operating Partnership - 8.3% interest in 2010 and 8.5% interest in 2009 (4)
Downtown Crossing, Boston - 50.0% interest (5)
For the Year Ended
December 31,
2010
2009
$
$
29,184
11,018
1,973
2,581
(10,990)
(2,419)
72
4,436
(537)
(1,155)
1,952
(13,677)
22,438
$
$
53,529
(25,665)
-
(1,636)
468
4,870
-
4,823
(19,978)
(10,395)
1,789
(27,715)
(19,910)
(1) 2009 includes an aggregate of $24,773 of income for our share of an income tax benefit and the reversal of stock appreciation rights
compensation expense.
(2) 2010 includes a $13,710 net gain resulting from Lexington's stock issuance and 2009 includes $19,121 of expense for our share of impairment
losses recorded by Lexington.
(3) 2010 includes $11,481 of impairment losses.
(4) 2009 includes $14,515 of impairment losses.
(5) 2009 includes $7,650 of expense for our share of a lease termination payment.
(6) 2009 includes $3,305 of impairment losses.
Income (loss) from Real Estate Fund
In the year ended December 31, 2010, we recognized a $303,000 loss from the Fund.
93
Results of Operations – Year Ended December 31, 2010 Compared to December 31, 2009 - continued
Interest and Other Investment Income (Loss), net
Interest and other investment income (loss), net was $235,315,000 for the year ended December 31, 2010, compared to a loss of
$116,350,000 for the year ended December 31, 2009, an increase in income of $351,665,000. This increase resulted primarily from:
(Amounts in thousands)
Mezzanine loans ($53,100 loss reversal in 2010, compared to $190,738 loss accrual in 2009)
Mark-to-market of J.C. Penney derivative position in 2010
Lower average mezzanine loan investments ($136,795 in 2010, compared to $345,000 in 2009)
Marketable equity securities - impairment losses in 2009
Decrease in value of investments in the deferred compensation plan (offset by a corresponding
decrease in the liability for plan assets in general and administrative expenses)
Other, net (primarily lower average yields on investments)
$
$
243,838
130,153
(21,862)
3,361
(1,457)
(2,368)
351,665
Interest and Debt Expense
Interest and debt expense was $560,052,000 for the year ended December 31, 2010, compared to $617,768,000 for the year
ended December 31, 2009, a decrease of $57,716,000. This decrease was primarily due to savings of (i) $93,765,000 from the
acquisition, retirement and repayment of an aggregate of $2.1 billion of our convertible senior debentures and senior unsecured notes
in 2009 and (ii) $30,639,000 from the repayment of $400,000,000 of cross-collateralized debt secured by 42 of our strip shopping
centers, partially offset by (iii) $43,515,000 from the issuance of $460,000,000 and $500,000,000 of senior unsecured notes in
September 2009 and March 2010, respectively, (iv) $16,392,000 of lower capitalized interest, and (v) $9,813,000 from the issuance of
$660,000,000 of cross-collateralized debt secured by 40 of our strip shopping centers.
Net Gain (Loss) on Extinguishment of Debt
In the year ended December 31, 2010, we recognized a $94,789,000 net gain on the early extinguishment of debt (primarily from
our acquisition of the mortgage loan secured by the Springfield Mall), compared to a $25,915,000 net loss in the year ended December
31, 2009 (primarily from the acquisition of our convertible senior debentures and related write-off of the unamortized debt discount).
Net Gain on Disposition of Wholly Owned and Partially Owned Assets
In the year ended December 31, 2010, we recognized an $81,432,000 net gain on disposition of wholly owned and partially
owned assets (primarily from the sale of a 45% interest in the Warner Building and sales of marketable securities), compared to a
$5,641,000 net gain in the year ended December 31, 2009 (primarily from the sales of marketable securities and residential
condominiums).
Income Tax Expense
Income tax expense was $22,476,000 for the year ended December 31, 2010, compared to $20,642,000 for the year ended
December 31, 2009 an increase of $1,834,000. This increase resulted primarily from higher income at 1290 Avenue of Americas and
555 California Street, which are subject to federal withholding taxes on dividends paid to foreign corporations.
94
Results of Operations – Year Ended December 31, 2010 Compared to December 31, 2009 - continued
(Loss) Income from Discontinued Operations
The table below sets forth the combined results of operations of assets related to discontinued operations for the years ended
December 31, 2010 and 2009.
(Amounts in thousands)
Total revenues
Total expenses
Impairment losses and litigation loss accrual
Net gain on sale of 1999 K Street
Net gain on sales of other real estate
(Loss) income from discontinued operations
For the Year Ended
December 31,
2010
2009
$
$
82,917
77,511
5,406
(15,056)
-
2,506
(7,144)
$
$
96,853
78,148
18,705
(14,060)
41,211
4,073
49,929
Net (Income) Loss Attributable to Noncontrolling Interests in Consolidated Subsidiaries
In the year ended December 31, 2010, we had $4,920,000 of net income attributable to noncontrolling interests in consolidated
subsidiaries, compared to $2,839,000 of a net loss for the year ended December 31, 2009, an increase in income of $7,759,000. This
increase resulted primarily from higher income at 1290 Avenue of the Americas and 555 California Street.
Net Income Attributable to Noncontrolling Interests in the Operating Partnership, including Unit Distributions
Net income attributable to noncontrolling interests in the Operating Partnership, including unit distributions for the year ended
December 31, 2010 and 2009 is primarily comprised of allocations of income to redeemable noncontrolling interests of $44,033,000
and $5,834,000, respectively and preferred unit distributions of the Operating Partnership of $11,195,000 and $19,286,000,
respectively. The increase of $38,199,000 in allocations of income to redeemable noncontrolling interests resulted primarily from
higher net income subject to allocation to unitholders.
Preferred Share Dividends
Preferred share dividends were $55,534,000 for the year ended December 31, 2010, compared to $57,076,000 for the year ended
December 31, 2009, a decrease of $1,542,000. This decrease resulted from the redemption of Series D-10 preferred shares in 2010.
Discount on Preferred Share and Unit Redemptions
Discount on preferred share redemptions of $4,382,000 in the year ended December 31, 2010 resulted from the redemption of
1,600,000 Series D-10 preferred shares with a par value of $25.00 per share, for an aggregate of $35,618,000.
95
Results of Operations – Year Ended December 31, 2010 Compared to December 31, 2009 - continued
Same Store EBITDA
Below are the same store EBITDA results on a GAAP and cash basis for each of our segments for the year ended December 31,
2010, compared to the year ended December 31, 2009.
(Amounts in thousands)
EBITDA for the year ended December 31, 2010
Add-back: non-property level overhead
expenses included above
Less: EBITDA from acquisitions, dispositions
and other non-operating income or expenses
GAAP basis same store EBITDA for the year
ended December 31, 2010
Less: Adjustments for straight-line rents,
amortization of below-market leases, net and other
non-cash adjustments
Cash basis same store EBITDA for the year
ended December 31, 2010
EBITDA for the year ended December 31, 2009
Add-back: non-property level overhead
expenses included above
Less: EBITDA from acquisitions, dispositions
and other non-operating income or expenses
GAAP basis same store EBITDA for the year
ended December 31, 2009
Less: Adjustments for straight-line rents,
amortization of below-market leases, net and other
non-cash adjustments
Cash basis same store EBITDA for the year
ended December 31, 2009
New York
Office
Washington, DC
Office
Retail
Merchandise
Mart
$
587,869
$
497,551
$
405,106
$
84,058
18,578
25,464
29,610
6,621
(58,001)
(55,339)
26,720
14,269
613,068
465,014
379,377
125,047
(62,962)
(5,184)
(40,362)
(2,681)
$
$
550,106
582,820
$
$
459,830
473,132
$
$
339,015
317,078
$
$
122,366
100,527
22,662
26,205
30,339
30,749
(2,583)
(57,302)
1,774
(1,935)
602,899
442,035
349,191
129,341
(65,069)
(23,940)
(39,871)
(4,036)
$
537,830
$
418,095
$
309,320
$
125,305
Increase (decrease) in GAAP basis same store EBITDA for
the year ended December 31, 2010 over the
year ended December 31, 2009
Increase (decrease) in Cash basis same store EBITDA for
the year ended December 31, 2010 over the
year ended December 31, 2009
$
$
10,169
$
22,979
$
30,186
$
(4,294)
12,276
$
41,735
$
29,695
$
(2,939)
% increase (decrease) in GAAP basis same store EBITDA
% increase (decrease) in Cash basis same store EBITDA
1.7%
2.3%
5.2%
10.0%
8.6%
9.6%
(3.3%)
(2.3%)
96
Supplemental Information
Net Income and EBITDA by Segment for the Three Months Ended December 31, 2011 and 2010
Below is a summary of net income and a reconciliation of net income to EBITDA(1) by segment for the three months ended
December 31, 2011 and 2010.
(Amounts in thousands)
Property rentals
Straight-line rent adjustments
Amortization of acquired below-
market leases, net
Total rentals
Tenant expense reimbursements
Cleveland Medical Mart development
project
Fee and other income:
BMS cleaning fees
Management and leasing fees
Lease termination fees
Other
Total revenues
Operating expenses
Depreciation and amortization
General and administrative
Cleveland Medical Mart development
project
Tenant buy-outs, impairment losses and
other acquisition related costs
Total expenses
Operating income (loss)
(Loss) applicable to Toys
Income (loss) from partially owned
entities
(Loss) from Real Estate Fund
Interest and other investment
income (loss), net
Interest and debt expense
Net gain on disposition of wholly
owned and partially owned assets
Income (loss) before income taxes
Income tax expense
Income (loss) from continuing
operations
(Loss) income from discontinued
operations
Net income (loss)
Less:
Net (income) loss attributable to
noncontrolling interests in
consolidated subsidiaries
Net (income) attributable to
noncontrolling interests in the
Operating Partnership, including
unit distributions
Net income (loss) attributable to
Vornado
Interest and debt expense(2)
Depreciation and amortization(2)
Income tax (benefit) expense(2)
EBITDA(1)
____________________
See notes on page 99.
For the Three Months Ended December 31, 2011
New York Washington, DC
Total
Office
Office
Retail
Merchandise
Mart
Toys
$
553,487 $
6,718
196,641 $
9,943
144,446 $
(6,683)
107,917 $
3,763
53,574 $
(621)
Other(3)
50,909
316
- $
-
13,055
573,260
84,563
6,998
213,582
31,771
563
138,326
9,288
3,852
115,532
38,819
(17)
52,936
2,481
45,877
-
15,275
4,647
3,917
14,276
741,815
250,331
159,965
54,415
24,296
2,134
2,363
7,111
281,257
118,440
47,928
4,426
-
-
2,732
781
4,756
155,883
50,302
59,095
6,876
-
45,877
-
632
478
1,725
157,186
31,762
28,707
6,064
-
(6)
295
726
102,309
33,204
11,981
6,141
44,187
-
-
-
44,187
-
-
-
-
-
-
-
-
-
-
-
-
-
35,844
544,742
197,073
(32,254)
15,531
(2,605)
-
170,794
110,463
-
(7,666)
-
-
116,273
39,610
-
(343)
-
7,553
74,086
83,100
-
1,875
-
25,188
120,701
(18,392)
-
163
-
-
-
-
(32,254)
-
-
1,659
52,884
2,204
-
(9,021)
(845)
-
(42)
45,180
16,623
12,254
30,908
-
3,103
62,888
(17,708)
-
21,502
(2,605)
53,705
(135,483)
176
(34,822)
80
(30,813)
(34)
(22,413)
8
(8,733)
-
-
53,475
(38,702)
7,159
103,126
(5,379)
-
68,151
(447)
-
8,534
(660)
4,278
66,806
(29)
-
(26,954)
(26)
-
(32,254)
-
2,881
18,843
(4,217)
97,747
67,704
7,874
66,777
(26,980)
(32,254)
14,626
(760)
96,987
165
67,869
-
7,874
(5,217)
61,560
4,292
(22,688)
-
(32,254)
-
14,626
(1,143)
(3,227)
(8,548)
-
87,296
198,252
215,683
(37,323)
463,908 $
64,642
42,154
54,472
509
161,777 $
$
-
-
7,874
34,253
63,270
743
106,140 $
41
-
61,601
23,644
29,394
29
114,668 $
-
-
-
2,043
-
(8,548)
(22,688)
8,891
12,093
26
(1,678) $
(32,254)
35,589
33,105
(31,046)
5,394 $
8,121
53,721
23,349
(7,584)
77,607
97
Supplemental Information – continued
Net Income and EBITDA by Segment for the Three Months Ended December 31, 2011 and 2010 - continued
(Amounts in thousands)
For the Three Months Ended December 31, 2010
Property rentals
Straight-line rent adjustments
Amortization of acquired below-
market leases, net
Total rentals
Tenant expense reimbursements
Fee and other income:
BMS cleaning fees
Management and leasing fees
Lease termination fees
Other
Total revenues
Operating expenses
Depreciation and amortization
General and administrative
Tenant buy-outs, impairment losses and
other acquisition related costs
Total expenses
Operating income (loss)
(Loss) applicable to Toys
Income (loss) from partially owned
entities
Income from Real Estate Fund
Interest and other investment
income, net
Interest and debt expense
Net gain (loss) on extinguishment
of debt
Net gain on disposition of wholly
owned and partially owned assets
Income (loss) before income taxes
Income tax expense
Income (loss) from continuing
operations
Income (loss) from discontinued
operations
Net income (loss)
Less:
Net (income) loss attributable to
noncontrolling interests in
consolidated subsidiaries
Net (income) attributable to
noncontrolling interests in the
Operating Partnership, including
unit distributions
Net income (loss) attributable to
Vornado
Interest and debt expense(2)
Depreciation and amortization(2)
Income tax (benefit) expense(2)
EBITDA(1)
__________________________
See notes on the following page.
New York Washington, DC
Total
Office
Office
Retail
Merchandise
Mart
Toys
$
538,685 $
19,989
191,906 $
11,555
139,824 $
330
105,260 $
6,905
54,117 $
(246)
Other(3)
47,578
1,445
- $
-
17,066
575,740
84,576
17,320
4,042
4,714
16,444
702,836
279,917
128,763
60,718
126,607
596,005
106,831
(30,685)
8,852
212,313
31,444
25,886
1,914
25
7,855
279,437
119,561
44,623
4,754
-
168,938
110,499
-
8,638
1,107
(10,699)
-
169,639
(136,698)
142
(33,253)
490
140,644
9,371
6,573
118,738
36,425
16
53,887
2,183
-
2,682
(108)
4,975
-
270
3,459
1,390
157,564
50,838
33,726
7,385
-
91,949
65,615
-
535
-
27
160,282
60,959
27,606
7,019
72,500
168,084
(7,802)
-
6,048
-
37
(28,948)
(23,016)
-
-
-
-
-
-
-
-
-
-
-
1,135
50,158
5,153
(8,566)
(949)
1,300
1,857
48,953
20,313
12,789
35,092
-
-
-
(30,685)
34,107
102,301
(53,348)
-
-
-
13,172
1,107
-
125
38
367
56,600
28,246
10,019
6,468
20,000
64,733
(8,133)
-
(418)
-
12
(9,549)
-
-
169,421
(41,932)
96,585
-
-
105,571
-
-
(8,986)
68,673
284,090
(6,483)
-
66,689
(497)
54,742
91,971
(724)
-
80,838
-
-
(18,088)
(291)
-
(30,685)
-
13,931
93,365
(4,971)
277,607
66,192
91,247
80,838
(18,379)
(30,685)
88,394
4,537
282,144
62
66,254
1,295
92,542
3,992
84,830
(812)
(19,191)
-
(30,685)
-
88,394
(3,430)
(2,269)
-
(1,673)
(21,741)
-
-
-
-
-
-
512
-
(21,741)
256,973
216,089
180,026
(36,589)
616,499 $
63,985
31,805
43,164
497
139,451 $
$
92,542
31,819
38,354
866
163,581 $
83,157
24,378
29,000
-
136,535 $
(19,191)
16,009
12,015
291
9,124 $
(30,685)
53,481
31,434
(43,504)
10,726 $
67,165
58,597
26,059
5,261
157,082
98
Supplemental Information – continued
Net Income and EBITDA by Segment for the Three Months Ended December 31, 2011 and 2010 - continued
Notes to preceding tabular information:
(1) EBITDA represents “Earnings Before Interest, Taxes, Depreciation and Amortization.” We consider EBITDA a supplemental
measure for making decisions and assessing the unlevered performance of our segments as it relates to the total return on assets as
opposed to the levered return on equity. As properties are bought and sold based on a multiple of EBITDA, we utilize their
measures to make investment decisions as well as to compare the performance of our assets to that of our peers. EBITDA should
not be considered a substitute for net income. EBITDA may not be comparable to similarly titled measures employed by other
companies.
(2) Interest and debt expense, depreciation and amortization and income tax expense in the reconciliation of net income (loss) to
EBITDA includes our share of these items from partially owned entities.
(3) The tables below provide information about EBITDA from certain investments that are included in the “other” column of the
preceding EBITDA by segment reconciliations. The totals for each of the columns below agree to the total EBITDA for the
“other” column in the preceding EBITDA by segment reconciliations.
(Amounts in thousands)
Our share of Real Estate Fund:
Income before net realized/unrealized gains
Net unrealized loss
Net realized gains
Carried interest reversal
Total
Lexington (1)
Alexander's
555 California Street
Hotel Pennsylvania
LNR
Other investments
Corporate general and administrative expenses (2)
Investment income and other, net (2)
Income from the mark-to-market of J.C. Penney derivative position
Net loss on extinguishment of debt
Net gain from Suffolk Downs' sale of a partial interest
Acquisition costs
Mezzanine loan loss reversal
Non-cash asset write-downs:
Real estate - primarily development projects:
Wholly owned entities
Partially owned entities
Net income attributable to noncontrolling interests in the Operating Partnership,
including unit distributions
$
For the Three Months
Ended December 31,
2011
2010
$
1,655
(1,803)
577
(929)
(500)
6,809
15,503
12,116
11,753
9,045
3,518
58,244
(22,958)
15,121
40,120
-
12,525
(3,103)
-
822
-
-
-
822
17,929
15,478
12,361
9,514
6,116
7,844
70,064
(29,675)
23,623
97,904
(8,986)
-
(4,094)
60,000
-
(13,794)
(30,013)
-
(8,548)
77,607
$
(21,741)
157,082
$
(1)
(2)
Includes a $7,712 net gain in the three months ended December 31, 2010, resulting from Lexington's stock issuance.
The amounts in these captions (for this table only) exclude the mark-to-market of our deferred compensation plan assets and offsetting
liability.
99
Supplemental Information – continued
Net Income and EBITDA by Segment for the Three Months Ended December 31, 2011 and 2010 - continued
Below is a summary of the percentages of EBITDA by geographic region (excluding Toys, discontinued operations and other
gains and losses that affect comparability), from our New York Office, Washington DC Office, Retail and Merchandise Mart
segments.
Region:
New York City metropolitan area
Washington, DC / Northern Virginia metropolitan area
California
Chicago
Puerto Rico
Other geographies
For the Three Months
Ended December 31,
2011
2010
62%
28%
2%
4%
2%
2%
100%
60%
30%
2%
5%
2%
1%
100%
100
Supplemental Information – continued
Three Months Ended December 31, 2011 Compared to December 31, 2010
Same Store EBITDA
Same store EBITDA represents EBITDA from property level operations which are owned by us in both the current and prior year
reporting periods. Same store EBITDA excludes segment-level overhead expenses, which are expenses that we do not consider to be
property-level expenses, as well as other non-operating items. We present same store EBITDA on both a GAAP basis and a cash
basis, which excludes income from the straight-lining of rents, amortization of below-market leases, net of above-market leases and
other non-cash adjustments. We present these non-GAAP measures to (i) facilitate meaningful comparisons of the operational
performance of our properties and segments, (ii) make decisions on whether to buy, sell or refinance properties, and (iii) compare the
performance of our properties and segments to those of our peers. Same store EBITDA should not be considered as an alternative to
net income or cash flow from operations and may not be comparable to similarly titled measures employed by other companies.
Below are the same store EBITDA results on a GAAP and cash basis for each of our segments for the three months ended
December 31, 2011, compared to the three months ended December 31, 2010.
(Amounts in thousands)
EBITDA for the three months ended December 31, 2011
Add-back: non-property level overhead
expenses included above
Less: EBITDA from acquisitions, dispositions
and other non-operating income or expenses
GAAP basis same store EBITDA for the three months
ended December 31, 2011
Less: Adjustments for straight-line rents,
amortization of below-market leases, net and other
non-cash adjustments
Cash basis same store EBITDA for the three months
ended December 31, 2011
EBITDA for the three months ended December 31, 2010
Add-back: non-property level overhead
expenses included above
Less: EBITDA from acquisitions, dispositions
and other non-operating income or expenses
GAAP basis same store EBITDA for the three months
ended December 31, 2010
Less: Adjustments for straight-line rents,
amortization of below-market leases, net and other
non-cash adjustments
Cash basis same store EBITDA for the three months
New York
Office
Washington, DC
Office
Retail
Merchandise
Mart
$
161,777
$
106,140
$
114,668
$
(1,678)
4,426
6,876
6,064
(7,798)
(2,629)
(20,495)
158,405
110,387
100,237
(15,429)
740
(5,781)
$
$
142,976
139,451
4,754
9,067
$
$
111,127
163,581
$
$
94,456
136,535
$
$
7,385
7,019
(57,113)
(45,653)
6,141
21,502
25,965
638
26,603
9,124
6,468
8,258
153,272
113,853
97,901
23,850
(17,910)
134
(8,828)
230
ended December 31, 2010
$
135,362
$
113,987
$
89,073
$
24,080
Increase (decrease) increase in GAAP basis same store EBITDA
for the three months ended December 31, 2011 over
the three months ended December 31, 2010
Increase (decrease) in Cash basis same store EBITDA for
the three months ended December 31, 2011 over the
three months ended December 31, 2010
$
$
% increase (decrease) in GAAP basis same store EBITDA
% increase (decrease) in Cash basis same store EBITDA
5,133
$
(3,466)
$
2,336
$
2,115
7,614
$
(2,860)
$
5,383
$
2,523
3.3%
5.6%
101
(3.0%)
(2.5%)
2.4%
6.0%
8.9%
10.5%
Supplemental Information – continued
Three Months Ended December 31, 2011 Compared to September 30, 2011
Our revenues and expenses are subject to seasonality during the year which impacts quarterly net earnings, cash flows and funds
from operations, and therefore impacts comparisons of the current quarter to the previous quarter. The business of Toys is highly
seasonal. Historically, Toys’ fourth quarter net income, which we record on a one-quarter lag basis in our first quarter, accounts for
more than 80% of Toys’ fiscal year net income. The Office and Merchandise Mart segments have historically experienced higher
utility costs in the first and third quarters of the year. The Merchandise Mart segment also has experienced higher earnings in the
second and fourth quarters of the year due to major trade shows occurring in those quarters. The Retail segment revenue in the fourth
quarter is typically higher due to the recognition of percentage and specialty rental income.
Below are the same store EBITDA results on a GAAP and cash basis for each of our segments for the three months ended
December 31, 2011, compared to the three months ended September 30, 2011.
(Amounts in thousands)
EBITDA for the three months ended December 31, 2011
Add-back: non-property level overhead expenses
included above
Less: EBITDA from acquisitions, dispositions
and other non-operating income or expenses
GAAP basis same store EBITDA for the three months
ended December 31, 2011
Less: Adjustments for straight-line rents, amortization of
below-market leases, net and other non-cash adjustments
Cash basis same store EBITDA for the three months
ended December 31, 2011
EBITDA for the three months ended September 30, 2011(1)
Add-back: non-property level overhead expenses
included above
Less: EBITDA from acquisitions, dispositions
and other non-operating income or expenses
GAAP basis same store EBITDA for the three months
ended September 30, 2011
Less: Adjustments for straight-line rents, amortization of
below-market leases, net and other non-cash adjustments
Cash basis same store EBITDA for the three months
ended September 30, 2011
Increase (decrease) in GAAP basis same store EBITDA for
the three months ended December 31, 2011 over the
three months ended September 30, 2011
Increase (decrease) in Cash basis same store EBITDA for
the three months ended December 31, 2011 over the
three months ended September 30, 2011
$
$
$
$
$
New York
Office
Washington, DC
Office
Retail
Merchandise
Mart
$
161,777 $
106,140
$
114,668
$
(1,678)
4,426
(5,831)
6,876
6,064
(2,629)
(20,495)
160,372
110,387
100,237
(16,502)
740
(5,781)
143,870 $
111,127
155,861 $
106,607
$
$
94,456
93,158
$
$
6,141
20,897
25,360
638
25,998
15,448
9,534
4,461
(5,716)
6,505
6,721
891
(2,066)
(4,445)
154,606
114,003
97,813
20,537
(12,299)
467
(8,921)
985
142,307 $
114,470
$
88,892
$
21,522
5,766 $
(3,616)
$
2,424
$
4,823
1,563 $
(3,343)
$
5,564
$
4,476
% increase (decrease) in GAAP basis same store EBITDA
% increase (decrease) in Cash basis same store EBITDA
3.7%
1.1%
(3.2%)
(2.9%)
2.5%
6.3%
23.5%
20.8%
(1)
Below is the reconciliation of net income (loss) to EBITDA for the three months ended September 30, 2011.
(Amounts in thousands)
Net income (loss) attributable to Vornado for the three months
ended September 30, 2011
Interest and debt expense
Depreciation and amortization
Income tax expense
EBITDA for the three months ended September 30, 2011
New York
Office
Washington, DC
Office
Merchandise
Retail
Mart
$
$
61,663 $
39,526
53,936
736
155,861 $
33,894
33,703
38,085
925
106,607
$
$
37,844
24,368
30,946
-
93,158
$
$
(7,195)
9,523
12,230
890
15,448
102
Related Party Transactions
Alexander’s
We own 32.4% of Alexander’s. Steven Roth, the Chairman of our Board, and Michael D. Fascitelli, our President and Chief
Executive Officer, are officers and directors of Alexander’s. We provide various services to Alexander’s in accordance with
management, development and leasing agreements. These agreements are described in Note 5 - Investments in Partially Owned
Entities to our consolidated financial statements in this Annual Report on Form 10-K.
Interstate Properties (“Interstate”)
Interstate is a general partnership in which Mr. Roth is the managing general partner. David Mandelbaum and Russell B.
Wight, Jr., Trustees of Vornado and Directors of Alexander’s, are Interstate’s two other partners. As of December 31, 2011, Interstate
and its partners beneficially owned an aggregate of approximately 6.3% of the common shares of beneficial interest of Vornado and
27.2% of Alexander’s common stock.
We manage and lease the real estate assets of Interstate pursuant to a management agreement for which we receive an annual fee
equal to 4% of annual base rent and percentage rent. The management agreement has a term of one year and is automatically
renewable unless terminated by either of the parties on 60 days’ notice at the end of the term. We believe based upon comparable fees
charged by other real estate companies, that the management agreement terms are fair to us.
Other
Upon maturity on December 23, 2011, Steven Roth, the Chairman of our Board of Trustees, repaid the Company his $13,122,500
outstanding loan. Pursuant to a credit agreement dated November 1999, Mr. Roth may draw up to $15,000,000 of loans from the
Company on a revolving basis. Each loan bears interest, payable quarterly, at the applicable Federal rate on the date the loan is made
and matures on the sixth anniversary of such loan. Loans are collateralized by assets with a value of not less than two times the
amount outstanding. On December 23, 2011, Mr. Roth borrowed $13,122,500 under this facility, which bears interest at 1.27% per
annum and matures on December 23, 2017.
103
Liquidity and Capital Resources
Property rental income is our primary source of cash flow and is dependent upon the occupancy and rental rates of our properties.
Other sources of liquidity to fund cash requirements include proceeds from debt financings, including mortgage loans, senior
unsecured borrowings, and our revolving credit facilities; proceeds from the issuance of common and preferred equity; and asset sales.
Our cash requirements include property operating expenses, capital improvements, tenant improvements, leasing commissions,
dividends to shareholders and distributions to unitholders of the Operating Partnership, as well as acquisition and development costs.
We anticipate that cash flow from continuing operations over the next twelve months will be adequate to fund our business
operations, cash distributions to unitholders of the Operating Partnership, cash dividends to shareholders, debt amortization and
recurring capital expenditures. Capital requirements for development expenditures and acquisitions (excluding Fund acquisitions)
may require funding from borrowings and/or equity offerings. In addition, the Fund has aggregate unfunded equity commitments of
$416,600,000 for acquisitions, including $104,150,000 from us.
Dividends
Our dividend policy, if continued for all of 2012, would require us to pay out approximately $510,000,000 of cash for common
share dividends. In addition, during 2012, we expect to pay approximately $71,000,000 of cash dividends on outstanding preferred
shares and approximately $49,000,000 of cash distributions to unitholders of the Operating Partnership.
Financing Activities and Contractual Obligations
We have an effective shelf registration for the offering of our equity and debt securities that is not limited in amount due to our
status as a “well-known seasoned issuer.” Our revolving credit facilities contain financial covenants that require us to maintain
minimum interest coverage and maximum debt to market capitalization ratios, and provides for higher interest rates in the event of a
decline in our ratings below Baa3/BBB. Our credit facilities also contain customary conditions precedent to borrowing, including
representations and warranties, and also contain customary events of default that could give rise to accelerated repayment, including
such items as failure to pay interest or principal. As of December 31, 2011, we are in compliance with all of the financial covenants
required by our revolving credit facilities.
As of December 31, 2011, we had $606,553,000 of cash and cash equivalents and $2,339,915,000 of borrowing capacity under
our revolving credit facilities, net of outstanding borrowings of $138,000,000 and letters of credit of $22,085,000. A summary of our
consolidated debt as of December 31, 2011 and 2010 is presented below.
(Amounts in thousands)
Consolidated debt:
Variable rate
Fixed rate
2011
December 31,
Balance
$
$
2,206,993
8,355,009
10,562,002
Weighted
Average
Interest Rate
2.25%
5.55%
4.86%
2010
December 31,
Balance
Weighted
Average
Interest Rate
$
$
2,903,510
7,985,932
10,889,442
1.76%
5.66%
4.62%
During 2012 and 2013, $1,292,886,000 and $1,714,664,000, respectively, of our outstanding debt matures. We may refinance this
maturing debt as it comes due or choose to repay it using a portion of our $2,946,468,000 of available capacity (comprised of
$606,553,000 of cash and cash equivalents and $2,339,915,000 of availability under our revolving credit facility. We may also
refinance or prepay other outstanding debt depending on prevailing market conditions, liquidity requirements and other factors. The
amounts involved in connection with these transactions could be material to our consolidated financial statements.
104
Liquidity and Capital Resources – continued
Financing Activities and Contractual Obligations – continued
Below is a schedule of our contractual obligations and commitments at December 31, 2011.
(Amounts in thousands)
Contractual cash obligations (principal and interest(1)):
Notes and mortgages payable
Senior unsecured notes due 2039 (PINES)
Operating leases
Senior unsecured notes due 2022
Senior unsecured notes due 2015
3.88% exchangeable senior debentures
Purchase obligations, primarily construction commitments
Revolving credit facilities
Capital lease obligations
2.85% convertible senior debentures
Total contractual cash obligations
Total
Less than
1 Year
1 – 3 Years
3 – 5 Years
Thereafter
$ 10,470,734 $ 1,217,259 $ 2,864,636 $ 2,585,671 $ 3,803,168
1,284,119
1,037,730
500,833
-
-
-
-
16,014
-
$ 15,148,048 $ 2,006,746 $ 3,091,165 $ 3,408,273 $ 6,641,864
1,465,244
1,189,879
600,833
569,063
505,633
161,479
155,330
19,547
10,306
36,225
31,472
20,000
21,250
505,633
161,479
2,415
707
10,306
72,450
57,066
40,000
505,313
-
-
146,360
1,413
-
72,450
63,611
40,000
42,500
-
-
6,555
1,413
-
Commitments:
Capital commitments to partially owned entities
Standby letters of credit
Total commitments
________________________
(1)
Interest on variable rate debt is computed using rates in effect at December 31, 2011.
$
$
288,799 $
22,085
310,884 $
213,799 $
21,606
235,405 $
75,000 $
479
75,479 $
- $
-
- $
-
-
-
Details of 2011 financing activities are provided in the “Overview” of Management’s Discussion and Analysis of Financial
Conditions and Results of Operations. Details of 2010 financing activities are discussed below.
In March 2010, we completed a public offering of $500,000,000 aggregate principal amount of 4.25% senior unsecured notes due
April 1, 2015 and retained net proceeds of approximately $496,000,000. The notes were sold at 99.834% of their face amount to yield
4.287%. The notes can be redeemed without penalty beginning January 1, 2015.
In August 2010, we sold $660,000,000 of 10-year mortgage notes in a single issuer securitization. The notes are comprised of a
$600,000,000 fixed rate component and a $60,000,000 variable rate component and are cross-collateralized by 40 of our strip
shopping centers. The $600,000,000 fixed rate portion bears interest at an initial rate of 4.18% and a weighted average rate of 4.31%
over the 10-year term and amortizes based on a 30-year schedule. The variable rate portion bears interest at LIBOR plus 1.36%, with
a 1% floor.
In December 2010, we acquired the mortgage loan secured by the Springfield Mall, located in Fairfax County, Virginia for
$115,000,000 in cash. The loan had an outstanding balance of $171,500,000. In a separate transaction, we acquired the prior owner’s
interest in the partnership that owns the mall in exchange for $25,000,000 in Operating Partnership units. These transactions resulted
in a $102,932,000 net gain on early extinguishment of debt.
In 2010, through open market repurchases and tender offers, we purchased $270,491,000 aggregate face amount ($264,476,000
aggregate carrying amount) of our convertible senior debentures and $17,000,000 aggregate face amount ($16,981,000 aggregate
carrying amount) of our senior unsecured notes for $274,857,000 and $17,382,000 in cash, respectively, resulting in a net loss of
$10,381,000 and $401,000, respectively.
105
Liquidity and Capital Resources – continued
Acquisitions and Investments
Details of 2011 acquisitions and investments are provided in the “Overview” of Management’s Discussion and Analysis of
Financial Conditions and Results of Operations. Details of 2010 acquisitions and investments are discussed below.
Investment in LNR Property Corporation (“LNR”)
On July 29, 2010, as a part of LNR’s recapitalization, we acquired a 26.2% equity interest in LNR for $116,000,000 in cash and
conversion into equity of our $15,000,000 mezzanine loan (the then current carrying amount) made to LNR’s parent, Riley Holdco
Corp. The recapitalization involved an infusion of a total of $417,000,000 in new cash equity and the reduction of LNR’s total debt to
$425,000,000 from $1.3 billion, excluding liabilities related to the consolidated CMBS and CDO trusts described below. We account
for our equity interest in LNR under the equity method on a one-quarter lag basis. LNR consolidates certain commercial mortgage-
backed securities (“CMBS”) and Collateralized Debt Obligation (“CDO”) trusts for which it is the primary beneficiary. The assets of
these trusts (primarily commercial mortgage loans), which aggregate approximately $142 billion as of September 30, 2010, are the
sole source of repayment of the related liabilities, which are non-recourse to LNR and its equity holders, including us. Changes in the
fair value of these assets each period are offset by changes in the fair value of the related liabilities through LNR’s consolidated
income statement.
510 Fifth Avenue
On October 8, 2010, we acquired 510 Fifth Avenue, a 59,000 square foot retail property located at 43rd Street and Fifth Avenue
in New York, for $57,000,000, comprised of $24,700,000 in cash and $32,300,000 of existing debt. We consolidate the accounts of
this property into our consolidated financial statements from the date of the acquisition.
San Jose, California
On October 15, 2010, we acquired the 55% interest that we did not already own of a 646,000 square foot retail property located in
San Jose, California, for $97,000,000, consisting of $27,000,000 in cash and $70,000,000 of existing debt. We consolidate the
accounts of the property into our consolidated financial statements from the date of this acquisition.
Atlantic City, New Jersey
On November 4, 2010, we acquired 11.3 acres of the land under a portion of the Borgata Hotel and Casino complex for
$83,000,000 in cash. The land is leased to the partnership that controls the Borgata Hotel and Casino complex through December
2070.
Investment in J.C. Penney Company, Inc. (“J.C. Penney”) (NYSE: JCP)
We own 23,400,000 J.C. Penney common shares, or 11.0% of J.C. Penney’s outstanding common shares. Of these shares,
4,815,990 are owned through a forward contract executed on October 7, 2010, at a weighted average strike price of $28.80 per share,
or $138,682,000 in the aggregate. The contract may be settled, at our election, in cash or common shares, in whole or in part, at any
time prior to October 9, 2012. The counterparty may accelerate settlement, in whole or in part, upon one year’s notice to us.
106
Liquidity and Capital Resources – continued
Certain Future Cash Requirements
Capital Expenditures
The following table summarizes other anticipated 2012 capital expenditures.
(Amounts in millions, except square foot
data)
Expenditures to maintain assets
Tenant improvements
Leasing commissions
Total capital expenditures and leasing
commissions
Square feet budgeted to be leased
(in thousands)
Weighted average lease term (years)
Tenant improvements and leasing
commissions:
Per square foot
Per square foot per annum
New York Washington, DC
Merchandise
Total
Office
Office
Retail
Mart
Other (1)
$
72.0 $
114.0
32.0
33.0 $
45.0
15.0
20.0 $
36.0
8.0
5.0 $
21.0
6.0
$
6.0
11.0
3.0
$
218.0 $
93.0 $
64.0 $
32.0 $
20.0
$
8.0
1.0
-
9.0
1,200
10
1,300
5
2,000
7
300
9
$
$
50.00 $
5.00 $
34.00 $
6.51 $
13.50 $
1.83 $
46.50 (2)
5.41 (2)
(1) Primarily 555 California Street, Hotel Pennsylvania and Warehouses.
(2) Tenant improvements and leasing commissions per square foot budgeted for 2012 leasing activity are $76.00 ($7.00 per annum) and $25.00
($4.50 per annum) for Merchandise Mart office and showroom space, respectively.
The table above excludes anticipated capital expenditures of each of our partially owned non-consolidated subsidiaries, as these
entities fund their capital expenditures without additional equity contributions from us.
Development and Redevelopment Expenditures
We expended $25,100,000 in 2011 to complete development projects in progress. We are evaluating various development and
redevelopment opportunities which we estimate could require as much as $1.5 billion to be expended over the next five years. These
opportunities include:
•
•
•
•
•
•
•
demolition of a 372,000 square foot office building in Crystal City, to construct a 700,000 square foot office building;
renovation of the Hotel Pennsylvania;
construction of a luxury residential condominium at 220 Central Park South, adjacent to Central Park;
re-tenanting and repositioning of 330 West 34th Street;
re-tenanting and repositioning of 280 Park Avenue;
complete renovation of the 1.4 million square foot Springfield Mall; and
re-tenanting and repositioning a number of our strip shopping centers.
We are also evaluating other development and redevelopment opportunities at certain of our properties in Manhattan, Rosslyn,
Pentagon City and Crystal City, for which plans, budgeted costs and financings have yet to be determined.
There can be no assurance that any of our development projects will commence, or if commenced, be completed on schedule or
within budget.
107
Liquidity and Capital Resources – continued
Insurance
We maintain general liability insurance with limits of $300,000,000 per occurrence and all risk property and rental value
insurance with limits of $2.0 billion per occurrence, including coverage for terrorist acts, with sub-limits for certain perils such as
floods. Our California properties have earthquake insurance with coverage of $180,000,000 per occurrence, subject to a deductible in
the amount of 5% of the value of the affected property, up to a $180,000,000 annual aggregate.
Penn Plaza Insurance Company, LLC (“PPIC”), our wholly owned consolidated subsidiary, acts as a re-insurer with respect to all
risk property and rental value insurance and a portion of our earthquake insurance coverage, and as a direct insurer for coverage for
acts of terrorism, including nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by the Terrorism Risk Insurance
Program Reauthorization Act. Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance
companies and the Federal government with no exposure to PPIC. Coverage for NBCR losses is up to $2.0 billion per occurrence, for
which PPIC is responsible for a deductible of $3,200,000 and 15% of the balance of a covered loss and the Federal government is
responsible for the remaining 85% of a covered loss. We are ultimately responsible for any loss borne by PPIC.
We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism. However, we
cannot anticipate what coverage will be available on commercially reasonable terms in future policy years.
Our debt instruments, consisting of mortgage loans secured by our properties which are non-recourse to us, senior unsecured
notes, exchangeable senior debentures, convertible senior debentures and revolving credit agreements contain customary covenants
requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements,
we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. Further, if lenders insist on greater
coverage than we are able to obtain it could adversely affect our ability to finance our properties and expand our portfolio.
Other Commitments and Contingencies
Our mortgage loans are non-recourse to us. However, in certain cases we have provided guarantees or master leased tenant
space. These guarantees and master leases terminate either upon the satisfaction of specified circumstances or repayment of the
underlying loans. As of December 31, 2011, the aggregate dollar amount of these guarantees and master leases is approximately
$283,625,000.
At December 31, 2011, $22,085,000 of letters of credit were outstanding under one of our revolving credit facilities. Our credit
facilities contain financial covenants that require us to maintain minimum interest coverage and maximum debt to market
capitalization ratios, and provide for higher interest rates in the event of a decline in our ratings below Baa3/BBB. Our credit facilities
also contain customary conditions precedent to borrowing, including representations and warranties, and also contain customary
events of default that could give rise to accelerated repayment, including such items as failure to pay interest or principal.
Each of our properties has been subjected to varying degrees of environmental assessment at various times. The environmental
assessments did not reveal any material environmental contamination. However, there can be no assurance that the identification of
new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites, or changes in
cleanup requirements would not result in significant costs to us.
We expect to fund additional capital to certain of our partially owned entities aggregating approximately $288,799,000.
108
Liquidity and Capital Resources – continued
Litigation
We are from time to time involved in legal actions arising in the ordinary course of business. In our opinion, after consultation
with legal counsel, the outcome of such matters, including the matter referred to below, is not expected to have a material adverse
effect on our financial position, results of operations or cash flows.
In 2003, Stop & Shop filed an action against us in the New York Supreme Court, claiming that we had no right to reallocate and
therefore continue to collect $5,000,000 of annual rent from Stop & Shop pursuant to a Master Agreement and Guaranty, because of
the expiration of the leases to which the annual rent was previously allocated. Stop & Shop asserted that an order of the Bankruptcy
Court for the Southern District of New York, as modified on appeal by the District Court, froze our right to reallocate and effectively
terminated our right to collect the annual rent from Stop & Shop. We asserted a counterclaim seeking a judgment for all the unpaid
annual rent accruing through the date of the judgment and a declaration that Stop & Shop will continue to be liable for the annual rent
as long as any of the leases subject to the Master Agreement and Guaranty remain in effect. After summary judgment motions by
both sides were denied, the parties conducted discovery. A trial was held in November 2010. On November 7, 2011, the Court
determined that we have a continuing right to allocate the annual rent to unexpired leases covered by the Master Agreement and
Guaranty, and directed entry of a judgment in our favor ordering Stop & Shop to pay us the unpaid annual rent accrued through
February 28, 2011 in the amount of $37,422,000, a portion of the annual rent due from March 1, 2011 through the date of judgment,
interest, and attorneys’ fees. On December 16, 2011, a money judgment based on the Court’s decision was entered in our favor in the
amount of $56,597,000 (including interest and costs). The amount for attorneys’ fees is being addressed in a proceeding before a
special referee. Stop & Shop has appealed the Court’s decision and the judgment, and has posted a bond to secure payment of the
judgment. On January 12, 2012, we commenced a new action against Stop & Shop seeking recovery of $2,500,000 of annual rent not
included in the money judgment, plus additional annual rent as it accrues.
As of December 31, 2011, we have a $41,983,000 receivable from Stop and Shop, excluding amounts due to us for interest and
costs resulting from the Court’s judgment. In the fourth quarter of 2011, based on the Court’s decision, we recognized $23,521,000 of
income, representing the portion of the $41,983,000 receivable that was previously reserved. As a result of Stop & Shop’s appeal, we
believe, after consultation with counsel, that the maximum reasonably possible loss is up to the total amount of the receivable of
$41,983,000.
109
Liquidity and Capital Resources – continued
Cash Flows for the Year Ended December 31, 2011
Our cash and cash equivalents were $606,553,000 at December 31, 2011, a $84,236,000 decrease over the balance at December
31, 2010. Our consolidated outstanding debt was $10,562,002,000 at December 31, 2011, a $327,440,000 decrease over the balance
at December 31, 2010. As of December 31, 2011 and December 31, 2010, $138,000,000 and $874,000,000, respectively, was
outstanding under our revolving credit facilities. During 2012 and 2013, $1,292,886,000 and $1,714,664,000 of our outstanding debt
matures, respectively. We may refinance our maturing debt as it comes due or choose to repay it.
Cash flows provided by operating activities of $702,499,000 was comprised of (i) net income of $740,000,000, (ii) distributions
of income from partially owned entities of $93,635,000, and (iii) $150,047,000 of non-cash adjustments, including depreciation and
amortization expense, the effect of straight-lining of rental income, equity in net income of partially owned entities, income from the
mark-to-market of derivative positions in marketable equity securities, impairment losses and tenant buy-out costs, net realized and
unrealized gains on Real Estate Fund assets and net gain on early extinguishment of debt, partially offset by (iv) the net change in
operating assets and liabilities of $281,183,000, of which $184,841,000 relates to Real Estate Fund investments.
Net cash used in investing activities of $164,761,000 was comprised of (i) $571,922,000 of investments in partially owned
entities, (ii) $165,680,000 of additions to real estate, (iii) $98,979,000 of investments in mezzanine loans receivable and other, (iv)
$93,066,000 of development costs and construction in progress, (v) $90,858,000 of acquisitions of real estate and other, and (vi)
$43,850,000 for the funding of collateral for the J.C. Penney derivative, partially offset by (vii) $318,966,000 of capital distributions
from partially owned entities, (viii) $187,294,000 of proceeds from sales and repayments of mezzanine loans receivable and other, (ix)
$140,186,000 of proceeds from sales of real estate and related investments, (x) changes in restricted cash of $126,380,000, (xi)
$70,418,000 of proceeds from sales of marketable securities, and (xii) $56,350,000 from the return of derivative collateral.
Net cash used in financing activities of $621,974,000 was comprised of (i) $3,740,327,000 for the repayments of borrowings, (ii)
$508,745,000 of dividends paid on common shares, (iii) $116,510,000 of distributions to noncontrolling interests, (iv) $61,464,000 of
dividends paid on preferred shares, (v) $47,395,000 of debt issuance and other costs, (vi) $28,000,000 for the purchase of outstanding
preferred units and shares, and (vii) $964,000 for the repurchase of shares related to stock compensation agreements and related tax
withholdings, partially offset by (viii) $3,412,897,000 of proceeds from borrowings, (ix) $238,842,000 of proceeds from the issuance
of Series J preferred shares, (x) $204,185,000 of contributions from noncontrolling interests, and (xi) $25,507,000 of proceeds
received from exercise of employee share options.
110
Liquidity and Capital Resources - continued
Capital Expenditures in the Year Ended December 31, 2011
Capital expenditures consist of expenditures to maintain assets, tenant improvement allowances and leasing commissions.
Recurring capital improvements include expenditures to maintain a property’s competitive position within the market and tenant
improvements and leasing commissions necessary to re-lease expiring leases or renew or extend existing leases. Non-recurring capital
improvements include expenditures to lease space that has been vacant for more than nine months and expenditures completed in the
year of acquisition and the following two years that were planned at the time of acquisition, as well as tenant improvements and
leasing commissions for space that was vacant at the time of acquisition of a property. Below is a summary of capital expenditures,
leasing commissions and a reconciliation of total expenditures on an accrual basis to the cash expended in the year ended December
31, 2011.
(Amounts in thousands)
Capital Expenditures (accrual basis):
Expenditures to maintain assets
Tenant improvements
Leasing commissions
Non-recurring capital expenditures
Total capital expenditures and leasing
commissions (accrual basis)
Adjustments to reconcile to cash basis:
Expenditures in the current year
applicable to prior periods
Expenditures to be made in future
periods for the current period
Total capital expenditures and leasing
commissions (cash basis)
New York Washington, DC
Total
Office
Office
Retail
Merchandise
Mart
Other
$
58,463 $
138,076
43,613
19,442
21,503 $
76,493
27,666
13,733
18,939 $
33,803
9,114
-
7,643 $
6,515
2,520
1,967
5,918 $
15,221
2,794
-
4,460
6,044
1,519
3,742
259,594
139,395
61,856
18,645
23,933
15,765
90,799
38,088
13,517
15,009
15,256
8,929
(146,062)
(78,302)
(33,530)
(8,697)
(14,185)
(11,348)
$
204,331 $
99,181 $
41,843 $
24,957 $
25,004 $
13,346
Tenant improvements and leasing commissions:
Per square foot per annum
$
3.81 $
5.25 $
4.50 $
0.86 $
3.95 $
Percentage of initial rent
9.1%
9.5%
11.0%
3.4%
12.3%
-
-
Development and Redevelopment Expenditures in the Year Ended December 31, 2011
Development and redevelopment expenditures consist of all hard and soft costs associated with the development or
redevelopment of a property, including tenant improvements, leasing commissions, capitalized interest and operating costs until the
property is substantially completed and ready for its intended use. Below is a summary of development and redevelopment
expenditures incurred in the year ended December 31, 2011.
(Amounts in thousands)
Bergen Town Center
510 Fifth Avenue
Green Acres Mall
Beverly Connection
Wayne Towne Center
North Bergen, New Jersey
Crystal Square
West End 25
Crystal City Hotel
Crystal Plaza 5
220 Central Park South
Poughkeepsie, New York
Other
New York Washington, DC
Total
Office
Office
Retail
Merchandise
Mart
Other
$
$
23,748 $
8,833
3,608
3,175
2,720
2,588
2,276
1,966
1,627
1,483
1,248
1,228
26,984
81,484 $
- $
-
-
-
-
-
-
-
-
-
-
-
4,738
4,738 $
111
- $
-
-
-
-
-
2,276
1,966
1,627
1,483
-
-
13,144
20,496 $
23,748 $
8,833
3,608
3,175
2,720
2,588
-
-
-
-
-
1,228
6,778
52,678 $
- $
-
-
-
-
-
-
-
-
-
-
-
898
898 $
-
-
-
-
-
-
-
-
-
-
1,248
-
1,426
2,674
Liquidity and Capital Resources – continued
Cash Flows for the Year Ended December 31, 2010
Our cash and cash equivalents were $690,789,000 at December 31, 2010, a $155,310,000 increase over the balance at December
31, 2009. Our consolidated outstanding debt was $10,889,442,000 at December 31, 2010, a $208,100,000 increase from the balance
at December 31, 2009.
Cash flows provided by operating activities of $771,086,000 was comprised of (i) net income of $708,031,000, (ii) $127,922,000
of non-cash adjustments, including depreciation and amortization expense, the effect of straight-lining of rental income, equity in net
income of partially owned entities, income from the mark-to-market of derivative positions in marketable equity securities, litigation
loss accrual and impairment losses, net gain on early extinguishment of debt, (iii) distributions of income from partially owned entities
of $61,037,000, (iv) interest received on repayment on mezzanine loan of $40,467,000, partially offset by (v) the net change in
operating assets and liabilities of $166,371,000, of which $144,423,000 relates to Real Estate Fund investments.
Net cash used in investing activities of $520,361,000 was comprised of (i) purchases of marketable equity securities, including
J.C. Penney Company, Inc. common shares, of $491,596,000, (ii) acquisitions of real estate of $173,413,000, (iii) investments in
partially owned entities of $165,170,000, (iv) development and redevelopment expenditures of $156,775,000, (v) additions to real
estate of $144,794,000, (vi) investments in mezzanine loans receivable and other of $85,336,000, and (vii) $12,500,000 for the
funding of collateral for the J.C. Penney derivative, partially offset by (viii) proceeds from the sale of real estate and related
investments of $280,462,000, (ix) restricted cash of $138,586,000, (x) proceeds from sales of real estate and related investments of
$127,736,000, (xi) proceeds received from repayment of mezzanine loans receivable of $70,762,000, (xii) distributions of capital from
investments in partially owned entities of $51,677,000, and (xiii) proceeds from maturing short-term investments of $40,000,000.
Net cash used in financing activities of $95,415,000 was comprised of (i) repayments of borrowing, including the purchase of
our senior unsecured notes, of $2,004,718,000, (ii) dividends paid on common shares of $474,299,000 (iii) purchases of outstanding
preferred units of $78,954,000, (iv) dividends paid on preferred shares of $55,669,000, (v) distributions to noncontrolling interests of
$53,842,000, (vi) repurchase of shares related to stock compensation agreements and related tax withholdings of $25,660,000, (vii)
debt issuance costs of $14,980,000 partially offset by (viii) proceeds from borrowings of $2,481,883,000, (ix) contributions from
noncontrolling interests of $103,831,000 and (x) proceeds received from exercise of employee share options of $26,993,000.
112
Liquidity and Capital Resources – continued
Capital Expenditures in the Year Ended December 31, 2010
(Amounts in thousands)
Capital Expenditures (accrual basis):
Expenditures to maintain assets
Tenant improvements
Leasing commissions
Non-recurring capital expenditures
Total capital expenditures and leasing
commissions (accrual basis)
Adjustments to reconcile to cash basis:
Expenditures in the current year
applicable to prior periods
Expenditures to be made in future
periods for the current period
Total capital expenditures and leasing
commissions (cash basis)
New York Washington, DC
Merchandise
Total
Office
Office
Retail
Mart
Other
$
53,051 $
116,939
30,351
5,381
20,472 $
50,387
15,325
-
17,532 $
17,464
6,044
-
4,838 $
9,827
2,215
915
6,099 $
31,742
4,761
-
4,110
7,519
2,006
4,466
205,722
86,184
41,040
17,795
42,602
18,101
64,216
35,080
13,296
6,698
4,825
4,317
(87,289)
(35,051)
(13,989)
(11,358)
(20,580)
(6,311)
$
182,649 $
86,213 $
40,347 $
13,135 $
26,847 $
16,107
Tenant improvements and leasing commissions:
$
Per square foot per annum
Percentage of initial rent
3.73 $
10.0%
6.70 $
13.5%
2.92 $
7.6%
1.41 $
5.8%
4.01 $
11.5%
-
-
Development and Redevelopment Expenditures in the Year Ended December 31, 2010
(Amounts in thousands)
220 Central Park South
Bergen Town Center
Residential condominiums
West End 25
1540 Broadway
Green Acres Mall
220 20th Street
Beverly Connection
Poughkeepsie, New York
Other
New York Washington, DC
Merchandise
Total
Office
Office
Retail
Mart
Other
$
$
46,769 $
18,783
15,600
9,997
8,091
7,679
4,097
3,695
3,054
39,010
156,775 $
- $
-
-
-
-
-
-
-
-
5,705
5,705 $
- $
-
-
9,997
-
-
4,097
-
-
12,495
26,589 $
- $
18,783
-
-
8,091
7,679
-
3,695
3,054
12,621
53,923 $
- $
-
-
-
-
-
-
-
-
2,667
2,667 $
46,769
-
15,600
-
-
-
-
-
-
5,522
67,891
113
Liquidity and Capital Resources – continued
Cash Flow for the Year Ended December 31, 2009
Our cash and cash equivalents were $535,479,000 at December 31, 2009, a $991,374,000 decrease over the balance at December
31, 2008. Our consolidated outstanding debt was $10,681,342,000 at December 31, 2009, a $1,494,975,000 decrease from the balance
at December 31, 2008.
Cash flows provided by operating activities of $633,579,000 was comprised of (i) net income of $128,450,000, (ii) $620,523,000
of non-cash adjustments, including depreciation and amortization expense, non-cash impairment losses, the effect of straight-lining of
rental income, equity in net income of partially owned entities and (iii) distributions of income from partially owned entities of
$30,473,000, partially offset by (iv) the net change in operating assets and liabilities of $145,867,000.
Net cash used in investing activities of $242,201,000 was comprised of (i) development and redevelopment expenditures of
$465,205,000, (ii) additions to real estate of $216,669,000, (iii) purchases of marketable equity securities of $90,089,000, (iv)
purchases of short-term investments of $55,000,000, (v) investments in partially owned entities of $38,266,000, partially offset by,
(vi) proceeds from the sale of real estate (primarily 1999 K Street) of $367,698,000, (vii) proceeds from restricted cash of
$111,788,000, (viii) proceeds from the sale of marketable securities of $64,355,000, (ix) proceeds received from repayments on
mezzanine loans receivable of $47,397,000, (x) proceeds from maturing short-term investments of $15,000,000 and (xi) distributions
of capital from partially owned entities of $16,790,000.
Net cash used in financing activities of $1,382,752,000 was primarily comprised of (i) acquisition and retirement of convertible
senior debentures and senior unsecured notes of $2,221,204,000, (ii) repayment of borrowings of $2,075,236,000, (iii) dividends paid
on common shares of $262,397,000, (iv) dividends paid on preferred shares of $57,076,000, (v) distributions to noncontrolling
interests of $42,451,000, (vi) repurchase of shares related to stock compensation arrangements and related tax withholdings of
$32,203,000, (vii) redemption of redeemable noncontrolling interests of $24,330,000, (viii) debt issuance and other costs of
$30,186,000, partially offset by, (ix) proceeds from borrowings of $2,648,175,000 and (x) proceeds from issuance of common shares
of $710,226,000.
114
Liquidity and Capital Resources – continued
Capital Expenditures in the Year Ended December 31, 2009
(Amounts in thousands)
Capital Expenditures (accrual basis):
Expenditures to maintain assets
Tenant improvements
Leasing commissions
Non-recurring capital expenditures
Total capital expenditures and leasing
commissions (accrual basis)
Adjustments to reconcile to cash basis:
Expenditures in the current year
applicable to prior periods
Expenditures to be made in future
periods for the current period
Total capital expenditures and leasing
commissions (cash basis)
New York Washington, DC
Merchandise
Total
Office
Office
Retail
Mart
Other
$
41,858 $
76,514
28,913
35,917
15,559 $
44,808
15,432
20,741
17,185 $
18,348
10,040
-
3,406 $
4,190
1,710
53
5,708 $
9,168
1,731
-
-
-
-
15,123
183,202
96,540
45,573
9,359
16,607
15,123
138,590
67,903
60,208
4,293
5,224
962
(75,397)
(40,516)
(21,627)
(5,244)
(5,900)
(2,110)
$
246,395 $
123,927 $
84,154 $
8,408 $
15,931 $
13,975
Tenant improvements and leasing commissions:
$
Per square foot per annum
Percentage of initial rent
2.74 $
6.9%
5.51 $
10.5%
2.10 $
5.2%
0.82 $
3.5%
1.32 $
3.5%
-
-
Development and Redevelopment Expenditures in the Year Ended December 31, 2009
(Amounts in thousands)
West End 25
Bergen Town Center
Residential condominiums
220 20th Street
1999 K Street (sold in September 2009)
North Bergen, New Jersey
Manhattan Mall
Poughkeepsie, New York
Garfield, New Jersey
1540 Broadway
2101 L Street
Beverly Connection
40 East 66th Street
One Penn Plaza
Other
New York Washington, DC
Merchandise
Total
Office
Office
Retail
Mart
Other
$
$
64,865 $
57,843
49,586
39,256
31,874
25,764
21,459
20,280
16,577
15,544
12,923
12,854
10,520
9,839
76,021
465,205 $
- $
-
-
-
-
-
-
-
-
-
-
-
-
9,839
11,790
21,629 $
64,865 $
-
-
39,256
31,874
-
-
-
-
-
12,923
-
-
-
22,849
171,767 $
- $
57,843
-
-
-
25,764
21,459
20,280
16,577
15,544
-
12,854
-
-
28,438
198,759 $
- $
-
-
-
-
-
-
-
-
-
-
-
-
-
6,409
6,409 $
-
-
49,586
-
-
-
-
-
-
-
-
-
10,520
-
6,535
66,641
115
Funds From Operations (“FFO”)
FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate
Investment Trusts (“NAREIT”). In the fourth quarter of 2011 and the first quarter of 2012, NAREIT issued updated guidance on FFO
and modified its definition of FFO to specifically exclude real estate impairment losses, including the prorata share of such losses of
unconsolidated subsidiaries. To the extent applicable, NAREIT requested companies to restate prior period FFO to conform to the
new definition. Accordingly, we have restated our quarter and year ended December 31, 2010 FFO to exclude real estate impairment
losses aggregating $103,981,000 and $108,981,000, respectively. NAREIT defines FFO as GAAP net income or loss adjusted to
exclude net gains from sales of depreciated real estate assets, real estate impairment losses, depreciation and amortization expense
from real estate assets, extraordinary items and other specified non-cash items, including the pro rata share of such adjustments of
unconsolidated subsidiaries. FFO and FFO per diluted share are used by management, investors and analysts to facilitate meaningful
comparisons of operating performance between periods and among our peers because it excludes the effect of real estate depreciation
and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate
diminishes predictably over time, rather than fluctuating based on existing market conditions. FFO does not represent cash generated
from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as
an alternative to net income as a performance measure or cash flows as a liquidity measure. FFO may not be comparable to similarly
titled measures employed by other companies.
FFO attributable to common shareholders plus assumed conversions was $1,230,973,000, or $6.42 per diluted share for the year
ended December 31, 2011, compared to $1,251,533,000, or $6.59 per diluted share for the year ended December 31, 2010. FFO
attributable to common shareholders plus assumed conversions was $280,369,000, or $1.46 per diluted share for the three months
ended December 31, 2011, compared to $432,860,000, or $2.27 per diluted share for the three months ended December 31, 2010.
Details of certain items that affect comparability are discussed in the financial results summary of our “Overview.”
(Amounts in thousands, except per share amounts)
Reconciliation of our net income to FFO:
Net income attributable to Vornado
Depreciation and amortization of real property
Net gain on sales of real estate
Real estate impairment losses
Proportionate share of adjustments to equity in net income of
Toys, to arrive at FFO:
Depreciation and amortization of real property
Net gain on sales of real estate
Income tax effect of above adjustments
Proportionate share of adjustments to equity in net income of
partially owned entities, excluding Toys, to arrive at FFO:
Depreciation and amortization of real property
Net gain on sales of real estate
Real estate impairment losses
Noncontrolling interests' share of above adjustments
FFO
Preferred share dividends
Discount on preferred share and unit redemptions
FFO attributable to common shareholders
Interest on 3.88% exchangeable senior debentures
Convertible preferred share dividends
FFO attributable to common shareholders plus assumed conversions
Reconciliation of Weighted Average Shares
Weighted average common shares outstanding
Effect of dilutive securities:
3.88% exchangeable senior debentures
Employee stock options and restricted share awards
Convertible preferred shares
Denominator for FFO per diluted share
For The Year
Ended December 31,
2011
2010
For The Three Months
Ended December 31,
2010
2011
$
662,302 $
530,113
647,883 $
505,806
87,296 $
152,655
(51,623)
28,799
(57,248)
97,500
-
28,799
70,883
(491)
(24,634)
70,174
-
(24,561)
18,039
-
(6,314)
99,992
(9,276)
-
(40,957)
1,265,108
(65,531)
5,000
1,204,577
26,272
124
78,151
(5,784)
11,481
(46,794)
1,276,608
(55,534)
4,382
1,225,456
25,917
160
$
1,230,973 $
1,251,533 $
26,699
(1,916)
-
(13,733)
291,525
(17,788)
-
273,737
6,602
30
280,369 $
256,973
124,024
(57,248)
92,500
16,878
-
(5,907)
19,596
(5,470)
11,481
(12,960)
439,867
(13,559)
-
426,308
6,512
40
432,860
184,308
182,340
184,571
183,308
5,736
1,658
55
191,757
5,736
1,747
71
189,894
5,736
1,392
52
191,751
5,736
1,735
70
190,849
FFO attributable to common shareholders plus assumed conversions per
diluted share
$
6.42 $
6.59 $
1.46 $
2.27
116
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have exposure to fluctuations in market interest rates. Market interest rates are sensitive to many factors that are beyond our
control. Our exposure to a change in interest rates on our consolidated and non-consolidated debt (all of which arises out of non-
trading activity) is as follows:
(Amounts in thousands, except per share amounts)
Consolidated debt:
Variable rate
Fixed rate
Prorata share of debt of non-
consolidated entities (non-recourse):
Variable rate – excluding Toys
Variable rate – Toys
Fixed rate (including $1,270,029 and
$1,421,820 of Toys debt in 2011 and 2010)
Redeemable noncontrolling interests’ share of
above
Total change in annual net income
Per share-diluted
$
$
$
$
December 31,
Balance
2,206,993
8,355,009
10,562,002
2011
Weighted
Average
Interest Rate
2.25%
5.55%
4.86%
$
Effect of 1%
Change In
Base Rates
2010
December 31,
Weighted
Average
Balance
Interest Rate
22,070 $
-
22,070 $
2,903,510
7,985,932
10,889,442
1.76%
5.66%
4.62%
284,372
706,301
3,208,472 (1)
4,199,145
2.85%
4.83%
6.96%
6.32%
2,844 $
7,063
345,308
501,623
-
9,907 $
2,428,986
3,275,917
1.39%
4.95%
6.86%
5.99%
$
$
(2,079)
29,898
0.16
(1) Excludes $33.3 billion for our 26.2% pro rata share of LNR's liabilities related to consolidated CMBS and CDO trusts which are non-recourse to
LNR and its equity holders, including us.
We may utilize various financial instruments to mitigate the impact of interest rate fluctuations on our cash flows and earnings,
including hedging strategies, depending on our analysis of the interest rate environment and the costs and risks of such strategies. As
of December 31, 2011, variable rate debt with an aggregate principal amount of $443,353,000 and a weighted average interest rate of
2.40% was subject to LIBOR caps. These caps are based on a notional amount of $443,353,000 and cap LIBOR at a weighted
average rate of 5.58%. In addition, we have one interest rate swap on a $425,000,000 loan that swapped the rate from LIBOR plus
2.00% (2.30% at December 31, 2011) to a fixed rate of 5.13% for the remaining seven-year term of the loan.
As of December 31, 2011, we have investments in mezzanine loans at variable interest rates with an aggregate carrying amount
of $54,724,000 and a weighted average rate of 10.42%, which partially mitigates our exposure to a change in interest rates on our
variable rate debt.
Fair Value of Debt
The estimated fair value of our consolidated debt is calculated based on current market prices and discounted cash flows at the
current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt. As of
December 31, 2011, the estimated fair value of our consolidated debt was $10,770,227,000.
Derivative Instruments
We have, and may in the future enter into, derivative positions that do not qualify for hedge accounting treatment, including our
economic interest in J.C. Penney common shares. Because these derivatives do not qualify for hedge accounting treatment, the gains
or losses resulting from their mark-to-market at the end of each reporting period are recognized as an increase or decrease in “interest
and other investment income (loss), net” on our consolidated statements of income. In addition, we are, and may in the future be,
subject to additional expense based on the notional amount of the derivative positions and a specified spread over LIBOR. Because the
market value of these instruments can vary significantly between periods, we may experience significant fluctuations in the amount of
our investment income or expense in any given period. During the years ended December 31, 2011 and 2010, we recognized income
from derivative instruments of $12,984,000 and $130,153,000, respectively.
117
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at December 31, 2011 and 2010
Consolidated Statements of Income for the years ended December 31, 2011, 2010 and 2009
Consolidated Statements of Comprehensive Income for the years ended December 31, 2011, 2010 and 2009
Consolidated Statements of Changes in Equity for the years ended December 31, 2011, 2010 and 2009
Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009
Notes to Consolidated Financial Statements
Page
119
120
121
122
123
126
128
118
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and Board of Trustees
Vornado Realty Trust
New York, New York
We have audited the accompanying consolidated balance sheets of Vornado Realty Trust (the “Company”) as of December 31,
2011 and 2010, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each
of the three years in the period ended December 31, 2011. Our audits also included the financial statement schedules listed in the
Index at Item 15. These financial statements and financial statement schedules are the responsibility of the Company’s management.
Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Vornado Realty
Trust at December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America. Also, in our
opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth therein.
As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of presenting comprehensive
income in 2011 due to the adoption of FASB Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income.
The change in presentation has been applied retrospectively to all periods presented.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
Company’s internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
February 27, 2012 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
February 27, 2012
119
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
VORNADO REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share amounts)
ASSETS
Real estate, at cost:
Land
Buildings and improvements
Development costs and construction in progress
Leasehold improvements and equipment
Total
Less accumulated depreciation and amortization
Real estate, net
Cash and cash equivalents
Restricted cash
Marketable securities
Accounts receivable, net of allowance for doubtful accounts of $43,241 and $62,979
Investments in partially owned entities
Investment in Toys "R" Us
Real Estate Fund investments
Mezzanine loans receivable, net
Receivable arising from the straight-lining of rents, net of allowance of $4,046 and $7,316
Deferred leasing and financing costs, net of accumulated amortization of $245,087 and $219,965
Identified intangible assets, net of accumulated amortization of $359,944 and $335,113
Assets related to discontinued operations
Due from officers
Other assets
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Notes and mortgages payable
Senior unsecured notes
Exchangeable senior debentures
Convertible senior debentures
Revolving credit facility debt
Accounts payable and accrued expenses
Deferred credit
Deferred compensation plan
Deferred tax liabilities
Liabilities related to discontinued operations
Other liabilities
Total liabilities
Commitments and contingencies
Redeemable noncontrolling interests:
Class A units - 12,160,771 and 12,804,202 units outstanding
Series D cumulative redeemable preferred units - 9,000,001 and 10,400,001 units outstanding
Total redeemable noncontrolling interests
Vornado shareholders' equity:
Preferred shares of beneficial interest: no par value per share; authorized 110,000,000
shares; issued and outstanding 42,186,709 and 32,340,009 shares
Common shares of beneficial interest: $.04 par value per share; authorized,
250,000,000 shares; issued and outstanding 185,080,020 and 183,661,875 shares
Additional capital
Earnings less than distributions
Accumulated other comprehensive income
Total Vornado shareholders' equity
Noncontrolling interests in consolidated subsidiaries
Total equity
See notes to the consolidated financial statements.
120
December 31,
2011
December 31,
2010
$
$
$
$
$
$
4,558,181
12,709,356
230,823
128,651
17,627,011
(3,095,037)
14,531,974
606,553
98,068
741,321
171,798
1,233,650
506,809
346,650
133,948
728,626
376,292
319,704
251,202
13,127
386,765
20,446,487
8,558,275
1,357,661
497,898
10,168
138,000
423,512
516,259
95,457
13,315
14,153
152,665
11,777,363
934,677
226,000
1,160,677
4,535,042
12,510,244
217,505
124,910
17,387,701
(2,715,046)
14,672,655
690,789
200,822
766,116
157,146
927,672
447,334
144,423
202,412
695,486
354,864
346,157
519,285
13,187
379,123
20,517,471
8,255,101
1,082,928
491,000
186,413
874,000
438,479
575,836
91,549
13,278
267,652
82,856
12,359,092
1,066,974
261,000
1,327,974
1,021,660
783,088
7,373
7,127,258
(1,401,704)
73,729
6,828,316
680,131
7,508,447
7,317
6,932,728
(1,480,876)
73,453
6,315,710
514,695
6,830,405
$
20,446,487
$
20,517,471
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share amounts)
REVENUES:
Property rentals
Tenant expense reimbursements
Cleveland Medical Mart development project
Fee and other income
Total revenues
EXPENSES:
Operating
Depreciation and amortization
General and administrative
Cleveland Medical Mart development project
Tenant buy-outs, impairment losses and
other acquisition related costs
Total expenses
Operating income
Income applicable to Toys "R" Us
Income (loss) from partially owned entities
Income (loss) from Real Estate Fund (of which $13,598 and ($806), respectively,
are attributable to noncontrolling interests)
Interest and other investment income (loss), net
Interest and debt expense (including amortization of deferred financing costs
of $20,729, $18,542 and $17,593 respectively)
Net gain (loss) on extinguishment of debt
Net gain on disposition of wholly owned and partially owned assets
Income before income taxes
Income tax expense
Income from continuing operations
Income (loss) from discontinued operations
Net income
Less:
Net (income) loss attributable to noncontrolling interests in
consolidated subsidiaries
Net (income) attributable to noncontrolling interests in the Operating
Partnership, including unit distributions
Net income attributable to Vornado
Preferred share dividends
Discount on preferred share and unit redemptions
NET INCOME attributable to common shareholders
INCOME PER COMMON SHARE - BASIC:
Income from continuing operations, net
Income (loss) from discontinued operations, net
Net income per common share
Weighted average shares
INCOME PER COMMON SHARE - DILUTED:
Income from continuing operations, net
Income (loss) from discontinued operations, net
Net income per common share
Weighted average shares
2011
Year Ended December 31,
2010
2009
$
2,261,811
$
2,237,707
$
349,420
154,080
150,354
2,915,665
1,091,597
553,811
209,981
145,824
58,299
2,059,512
856,153
48,540
71,770
355,616
-
147,358
2,740,681
1,082,844
522,022
213,949
-
129,458
1,948,273
792,408
71,624
22,438
22,886
148,826
(303)
235,315
(544,015)
-
15,134
619,294
(24,827)
594,467
145,533
740,000
(560,052)
94,789
81,432
737,651
(22,476)
715,175
(7,144)
708,031
2,148,975
351,290
-
155,326
2,655,591
1,050,545
519,534
230,584
-
73,763
1,874,426
781,165
92,300
(19,910)
-
(116,350)
(617,768)
(25,915)
5,641
99,163
(20,642)
78,521
49,929
128,450
(21,786)
(4,920)
2,839
(55,912)
662,302
(65,531)
5,000
(55,228)
647,883
(55,534)
4,382
601,771
$
596,731
$
(25,120)
106,169
(57,076)
-
49,093
2.52
0.74
3.26
$
$
3.31
(0.04)
3.27
$
$
0.01
0.27
0.28
184,308
182,340
171,595
2.50
0.73
3.23
$
$
3.28
(0.04)
3.24
$
$
0.01
0.27
0.28
186,021
184,159
173,503
$
$
$
$
$
See notes to consolidated financial statements.
121
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
Net income
Other comprehensive income (loss):
Change in unrealized net gain on securities available-for-sale
Pro rata share of other comprehensive income of
nonconsolidated subsidiaries
Sale of securities available-for-sale
Change in value of interest rate swap
Other
Comprehensive income
Less:
Comprehensive (income) attributable to noncontrolling interests
Comprehensive income attributable to Vornado
2011
Year Ended December 31,
2010
2009
$
740,000
$
708,031
$
128,450
46,177
46,447
6,147
12,859
(9,540)
(43,704)
(5,245)
740,547
11,853
(13,160)
-
(136)
753,035
(77,969)
(63,343)
$
662,578
$
689,692
$
22,052
7,715
-
(566)
163,798
(25,144)
138,654
See notes to consolidated financial statements.
122
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Preferred Shares
Common Shares
Shares
Amount
33,954 $ 823,807
-
-
-
-
-
-
Shares
155,286 $
Amount
-
6,441
-
Earnings
Less Than
Distributions
Additional
Capital
6,025,976 $
6,195 $
-
258
-
-
285,338
-
(1,047,340) $
106,169
(547,993)
(57,076)
Accumulated
Other
Comprehensive
Income (Loss)
Non-
controlling
Interests
(6,899) $
-
-
-
-
-
-
-
-
6,147
7,715
22,052
-
-
412,913 $
(2,839)
-
-
-
-
-
-
-
-
-
-
-
-
Total
Equity
6,214,652
103,330
(262,397)
(57,076)
710,226
90,955
(29,638)
-
13,092
6,147
7,715
22,052
32,588
(167,049)
-
-
-
-
-
-
(2)
(89)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(32)
33,952 $ 823,686
468
2
(1)
-
-
-
-
-
-
-
181,214 $
17,250
690
709,536
1,768
70
90,885
-
-
1,713
(31,355)
4
-
1
-
-
-
-
-
89
13,091
-
-
-
32,588
(167,049)
-
-
-
-
-
-
-
-
4
(1,577,591) $
-
-
7,218 $
(30,159)
(1,001)
6,961,007 $
-
(566)
28,449 $
-
(3,437)
406,637 $
(30,159)
(5,032)
6,649,406
(Amounts in thousands)
Balance, December 31, 2008
Net income (loss)
Dividends on common shares
Dividends on preferred shares
Common shares issued:
In connection with April 2009
public offering
Upon redemption of Class A
units, at redemption value
Under employees' share
option plan
Conversion of Series A preferred
shares to common shares
Deferred compensation shares
and options
Change in unrealized net gain
on securities available-for-sale
Sale of securities available-for-sale
Pro rata share of other
comprehensive income of
nonconsolidated subsidiaries
Voluntary surrender of equity
awards on March 31, 2009
Adjustments to carry redeemable
Class A units at redemption value
Allocation of cash paid to the equity
component upon repurchase of
convertible senior debentures
Other
Balance, December 31, 2009
See notes to consolidated financial statements.
123
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CONTINUED
Preferred Shares
Common Shares
Shares
181,214 $
Amount
Earnings
Less Than
Distributions
Additional
Capital
6,961,007 $
Accumulated
Other
Comprehensive
Income (Loss)
Non-
controlling
Interests
(Amounts in thousands)
Balance, December 31, 2009
Net income
Dividends on common shares
Dividends on preferred shares
Redemption of preferred shares
Common shares issued:
Upon redemption of Class A
units, at redemption value
Under employees' share
option plan
Under dividend reinvestment plan
Contributions:
Real Estate Fund
Other
Conversion of Series A preferred
shares to common shares
Deferred compensation shares
and options
Change in unrealized net gain
on securities available-for-sale
Sale of securities available-for-sale
Pro rata share of other
comprehensive income of
nonconsolidated subsidiaries
Adjustments to carry redeemable
Class A units at redemption value
Other
Balance, December 31, 2010
Shares
Amount
33,952 $ 823,686
-
-
-
(39,982)
-
-
-
(1,600)
-
-
-
-
-
-
-
-
-
-
(12)
(616)
-
-
-
-
-
-
-
-
-
-
-
-
32,340 $ 783,088
-
-
-
-
1,548
812
22
-
-
18
48
-
-
-
-
-
183,662 $
7,218 $
-
-
-
-
62
33
1
-
-
1
2
-
-
-
-
-
7,317 $
-
-
-
-
126,702
25,290
1,656
-
-
615
9,345
-
-
-
(191,826)
(61)
(1,577,591) $
647,883
(474,299)
(55,669)
4,382
-
(25,584)
-
-
-
-
-
-
-
-
-
2
28,449 $
-
-
-
-
-
-
-
-
-
-
-
46,447
(13,160)
11,853
406,637 $
4,920
-
-
-
-
-
-
93,583
8,783
-
-
-
-
-
Total
Equity
6,649,406
652,803
(474,299)
(55,669)
(35,600)
126,764
(261)
1,657
93,583
8,783
-
9,347
46,447
(13,160)
11,853
6,932,728 $
(1,480,876) $
-
(136)
73,453 $
-
772
514,695 $
(191,826)
577
6,830,405
See notes to consolidated financial statements.
124
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CONTINUED
(Amounts in thousands)
Balance, December 31, 2010
Net income
Dividends on common shares
Dividends on preferred shares
Issuance of Series J preferred shares
Common shares issued:
Upon redemption of Class A
units, at redemption value
Under employees' share
option plan
Under dividend reinvestment plan
Contributions:
Real Estate Fund
Other
Distributions:
Real Estate Fund
Other
Conversion of Series A preferred
shares to common shares
Deferred compensation shares
and options
Change in unrealized net gain
on securities available-for-sale
Sale of securities available-for-sale
Pro rata share of other
comprehensive income of
nonconsolidated subsidiaries
Change in value of interest rate swap
Adjustments to carry redeemable
Class A units at redemption value
Redeemable noncontrolling interests'
share of above adjustments
Other
Balance, December 31, 2011
Preferred Shares
Common Shares
Shares
183,662 $
Amount
Shares
Amount
32,340 $ 783,088
-
-
-
238,842
-
-
-
9,850
7,317 $
-
-
-
-
32
23
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
798
590
21
-
-
-
-
5
4
-
-
-
-
-
-
-
185,080 $
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3)
(165)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(105)
42,187 $ 1,021,660
Earnings
Less Than
Distributions
Additional
Capital
6,932,728 $
Accumulated
Other
Comprehensive
Income (Loss)
Non-
controlling
Interests
-
-
-
-
64,798
23,705
1,771
-
-
-
-
165
(1,480,876) $
662,302
(508,745)
(65,694)
-
-
(13,289)
-
-
-
-
-
-
10,608
(523)
-
-
-
-
98,092
-
-
-
-
-
46,177
(9,540)
12,859
(43,704)
-
73,453 $
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
Equity
6,830,405
684,088
(508,745)
(65,694)
238,842
64,830
10,439
1,772
203,407
778
(49,422)
(15,604)
-
10,085
46,177
(9,540)
12,859
(43,704)
98,092
514,695 $
21,786
-
-
-
-
-
-
203,407
778
(49,422)
(15,604)
-
-
-
-
-
-
-
-
-
7,373 $
-
(4,609)
7,127,258 $
-
5,121
(1,401,704) $
(271)
(5,245)
73,729 $
-
4,491
680,131 $
(271)
(347)
7,508,447
See notes to consolidated financial statements.
125
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Cash Flows from Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of deferred financing costs)
Equity in net income of partially owned entities, including Toys “R” Us
Distributions of income from partially owned entities
Net (gain) loss on extinguishment of debt
Mezzanine loans loss (reversal) accrual and net gain on disposition
Amortization of below-market leases, net
Impairment losses, write-off of tenant buy-outs and litigation loss accrual
Net gain on sales of real estate
Straight-lining of rental income
Other non-cash adjustments
Recognition of disputed account receivable from Stop & Shop
Net realized and unrealized gains on Real Estate Fund assets
Net gain on disposition of wholly owned and partially owned assets
Income from the mark-to-market of J.C. Penney derivative position
Interest received on repayment of mezzanine loan
Write-off of unamortized costs from the voluntary surrender of equity awards
Changes in operating assets and liabilities:
Real Estate Fund investments
Accounts receivable, net
Prepaid assets
Other assets
Accounts payable and accrued expenses
Other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities:
Investments in partially owned entities
Distributions of capital from partially owned entities
Proceeds from sales and repayments of mezzanine loans receivable and other
Additions to real estate
Proceeds from sales of real estate and related investments
Restricted cash
Investments in mezzanine loans receivable and other
Development costs and construction in progress
Acquisitions of real estate and other
Proceeds from sales of, and return of investment in, marketable securities
Return of J.C. Penney derivative collateral
Funding of J.C. Penney derivative collateral
Proceeds from the repayment of loan to officer
Loan to officer
Purchases of marketable securities including J.C. Penney common
shares and other
Proceeds from maturing short-term investments
Purchases of short-term investments
Net cash used in investing activities
Year Ended December 31,
2010
2011
2009
$
740,000
$
708,031
$
128,450
580,990
(120,310)
93,635
(83,907)
(82,744)
(63,044)
58,173
(51,623)
(45,788)
27,325
(23,521)
(17,386)
(15,134)
(12,984)
-
-
(184,841)
8,869
(7,779)
(87,488)
(28,699)
18,755
702,499
(571,922)
318,966
187,294
(165,680)
140,186
126,380
(98,979)
(93,066)
(90,858)
70,418
56,350
(43,850)
13,123
(13,123)
-
-
-
(164,761)
556,312
(94,062)
61,037
(97,728)
(53,100)
(66,202)
137,367
(2,506)
(76,926)
36,352
-
-
(81,432)
(130,153)
40,467
-
(144,423)
2,019
6,321
(66,736)
2,645
33,803
771,086
(165,170)
51,677
70,762
(144,794)
127,736
138,586
(85,336)
(156,775)
(173,413)
280,462
-
(12,500)
-
-
(491,596)
40,000
-
(520,361)
559,053
(72,390)
30,473
25,915
190,738
(72,481)
91,184
(45,284)
(98,355)
15,196
-
-
(5,641)
-
-
32,588
-
15,383
(90,519)
(61,878)
(3,606)
(5,247)
633,579
(38,266)
16,790
47,397
(216,669)
367,698
111,788
-
(465,205)
-
64,355
-
-
-
-
(90,089)
15,000
(55,000)
(242,201)
See notes to consolidated financial statements.
126
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31,
2010
2011
2009
(Amounts in thousands)
Cash Flows from Financing Activities:
Repayments of borrowings
Proceeds from borrowings
Dividends paid on common shares
Proceeds from the issuance of Series J preferred shares
Contributions from noncontrolling interests
Distributions to noncontrolling interests
Dividends paid on preferred shares
Debt issuance and other costs
Purchases of outstanding preferred units and shares
Proceeds received from exercise of employee share options
Repurchase of shares related to stock compensation agreements and related
tax withholdings
Acquisition of convertible senior debentures and senior unsecured notes
Proceeds from issuance of common shares
Net cash used in by financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental Disclosure of Cash Flow Information:
Cash payments for interest (net of amounts capitalized of $1,197, $864 and $17,256)
Cash payments for income taxes
Non-Cash Investing and Financing Activities:
Adjustments to carry redeemable Class A units at redemption value
Contribution of mezzanine loan receivable to joint venture
Write-off of fully depreciated assets
Common shares issued upon redemption of Class A units at redemption value
Change in unrealized net gain on securities available-for-sale
Like-kind exchange of real estate
Financing assumed in acquisitions
Dividends paid in common shares
Unit distributions paid in Class A units
Increase in assets and liabilities resulting from the consolidation of investments
previously accounted for on the equity method:
Real estate, net
Notes and mortgages payable
Decrease in assets and liabilities resulting from the deconsolidation of discontinued
operations and/or investments that were previously consolidated:
Real estate, net
Notes and mortgages payable
$ (3,740,327) $ (1,564,143) $ (2,075,236)
2,648,175
(262,397)
-
2,180
(42,451)
(57,076)
(30,186)
(24,330)
1,750
2,481,883
(474,299)
-
103,831
(53,842)
(55,669)
(14,980)
(78,954)
26,993
3,412,897
(508,745)
238,842
204,185
(116,510)
(61,464)
(47,395)
(28,000)
25,507
$
$
$
$
(964)
-
-
(621,974)
(84,236)
690,789
606,553 $
(25,660)
(440,575)
-
(95,415)
155,310
535,479
690,789 $
(32,203)
(2,221,204)
710,226
(1,382,752)
(991,374)
1,526,853
535,479
531,174 $
549,327 $
631,573
26,187 $
23,960 $
21,775
98,092 $
73,750
(72,279)
64,830
46,177
(23,626)
-
-
-
(191,826) $
-
(63,007)
126,764
46,447
-
102,616
-
-
(167,049)
-
(86,291)
90,955
6,147
-
-
285,596
23,876
-
-
102,804
57,563
(145,333)
(232,502)
(401,857)
(316,490)
-
-
-
-
See notes to consolidated financial statements.
127
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Business
Vornado Realty Trust (“Vornado”) is a fully-integrated real estate investment trust (“REIT”) and conducts its business through,
and substantially all of its interests in properties are held by, Vornado Realty L.P., a Delaware limited partnership (the “Operating
Partnership”). Accordingly, Vornado’s cash flow and ability to pay dividends to its shareholders is dependent upon the cash flow of
the Operating Partnership and the ability of its direct and indirect subsidiaries to first satisfy their obligations to creditors. Vornado is
the sole general partner of, and owned approximately 93.5% of the common limited partnership interest in the Operating Partnership
at December 31, 2011. All references to “we,” “us,” “our,” the “Company” and “Vornado” refer to Vornado Realty Trust and its
consolidated subsidiaries, including the Operating Partnership.
As of December 31, 2011, we own all or portions of:
Office Properties:
•
•
•
In Midtown Manhattan – 30 properties aggregating 20.8 million square feet;
In the Washington, DC / Northern Virginia area – 77 properties aggregating 20.5 million square feet, including 63 office
properties aggregating 17.5 million square feet and seven residential properties containing 2,424 units;
In San Francisco’s financial district – a 70% controlling interest in 555 California Street, a three-building office complex
aggregating 1.8 million square feet, known as the Bank of America Center;
Retail Properties:
•
•
In Manhattan – 2.2 million square feet in 46 properties, of which 1.0 million square feet in 21 properties is in our Retail
Properties segment and 1.2 million square feet in 25 properties is in our New York Office Properties segment;
134 strip shopping centers, regional malls, and single tenant retail assets aggregating 24.2 million square feet, primarily in the
northeast states, California and Puerto Rico;
Merchandise Mart Properties:
•
5.7 million square feet of showroom and office space, including the 3.5 million square foot Merchandise Mart in Chicago;
Other Real Estate and Related Investments:
• A 32.4% interest in Alexander’s, Inc. (NYSE: ALX), which owns seven properties in the greater New York metropolitan
area, including 731 Lexington Avenue, the 1.3 million square foot Bloomberg headquarters building;
• A 25.0% interest in Vornado Capital Partners, our $800 million real estate fund. We are the general partner and investment
manager of the fund;
• The 1,700 room Hotel Pennsylvania in Midtown Manhattan;
• A 32.7% interest in Toys “R” Us, Inc.;
• An 11.0% interest in J.C. Penney Company, Inc. (NYSE: JCP); and
• Other real estate and related investments, marketable securities and mezzanine loans on real estate, including a 26.2% equity
interest in LNR Property Corporation, an industry leading mortgage servicer and special servicer.
128
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include the accounts of Vornado and the Operating Partnership. All
significant inter-company amounts have been eliminated. We account for unconsolidated partially owned entities on the equity
method of accounting. Our consolidated financial statements are prepared in accordance with accounting principles generally
accepted in the United States of America, which require us to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Recently Issued Accounting Literature
In May 2011, the Financial Accounting Standards Board (“FASB”) issued Update No. 2011-04, Fair Value Measurements (Topic
820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU No.
2011-04”). ASU No. 2011-04 provides a uniform framework for fair value measurements and related disclosures between GAAP and
International Financial Reporting Standards (“IFRS”) and requires additional disclosures, including: (i) quantitative information about
unobservable inputs used, a description of the valuation processes used, and a qualitative discussion about the sensitivity of the
measurements to changes in the unobservable inputs, for Level 3 fair value measurements; (ii) fair value of financial instruments not
measured at fair value but for which disclosure of fair value is required, based on their levels in the fair value hierarchy; and
(iii) transfers between Level 1 and Level 2 of the fair value hierarchy. ASU No. 2011-04 is effective for interim and annual periods
beginning on or after December 15, 2011. The adoption of this update on January 1, 2012 is not expected to have a material impact on
our consolidated financial statements.
In June 2011, the FASB issued Update No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income
(“ASU No. 2011-05”). ASU No. 2011-05 requires the presentation of net income and other comprehensive income in one continuous
statement or in two separate but consecutive statements. ASU No. 2011-05 is effective for interim and annual periods beginning on or
after December 15, 2011, with early adoption permitted. The Company early adopted this guidance as of December 31, 2011, and has
presented the Consolidated Statements of Comprehensive Income as a separate financial statement.
In September 2011, the FASB issued Update No. 2011-09, Compensation – Retirement Benefits (Topic 715): Disclosures About
an Employer’s Participation in a Multiemployer Plan (“ASU No. 2011-09”). ASU No. 2011-09 requires enhanced disclosures about
an entity’s participation in multiemployer plans that offer pension and other postretirement benefits. ASU No. 2011-09 became
effective for interim and annual periods ending on or after December 15, 2011. The adoption of this update on December 31, 2011 did
not have a material impact on our consolidated financial statements.
Significant Accounting Policies
Real Estate: Real estate is carried at cost, net of accumulated depreciation and amortization. Betterments, major renewals and
certain costs directly related to the improvement and leasing of real estate are capitalized. Maintenance and repairs are expensed as
incurred. For redevelopment of existing operating properties, the net book value of the existing property under redevelopment plus the
cost for the construction and improvements incurred in connection with the redevelopment are capitalized to the extent the capitalized
costs of the property do not exceed the estimated fair value of the redeveloped property when complete. If the cost of the redeveloped
property, including the undepreciated net book value of the property carried forward, exceeds the estimated fair value of redeveloped
property, the excess is charged to expense. Depreciation is provided on a straight-line basis over estimated useful lives which range
from 7 to 40 years. Tenant allowances are amortized on a straight-line basis over the lives of the related leases, which approximate the
useful lives of the assets. Additions to real estate include interest expense capitalized during construction of $1,197,000 and $864,000
for the years ended December 31, 2011 and 2010, respectively.
129
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Basis of Presentation and Significant Accounting Policies- continued
Upon the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements,
identified intangibles, such as acquired above and below-market leases and acquired in-place leases and tenant relationships) and
acquired liabilities and we allocate the purchase price based on these assessments. We assess fair value based on estimated cash flow
projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows
are based on a number of factors including historical operating results, known trends, and market/economic conditions.
Our properties, including any related intangible assets, are individually reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment exists when the carrying amount of an asset
exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis. An impairment loss is
measured based on the excess of the property’s carrying amount over its estimated fair value. Impairment analyses are based on our
current plans, intended holding periods and available market information at the time the analyses are prepared. If our estimates of the
projected future cash flows, anticipated holding periods, or market conditions change, our evaluation of impairment losses may be
different and such differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is
subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ
materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses.
The table below summarizes tenant buy-outs, impairment losses and other acquisition related costs incurred in the years ended
December 31, 2011, 2010 and 2009.
(Amounts in thousands)
Tenant buy-outs, acquisition related costs and other
Real estate assets
Development projects and undeveloped land
Condominium units held for sale (see page 132)
For the Year Ended December 31,
2010
2009
2011
$
$
32,259 $
23,000
3,040
-
58,299 $
6,945 $
92,500
-
30,013
129,458 $
-
4,789
55,307
13,667
73,763
Partially Owned Entities: In determining whether we have a controlling interest in a partially owned entity and the requirement
to consolidate the accounts of that entity, we consider factors such as ownership interest, board representation, management
representation, authority to make decisions, and contractual and substantive participating rights of the partners/members as well as
whether the entity is a variable interest entity in which we have power over significant activities of the entity and the obligation to
absorb losses or receive benefits that could potentially be significant to the entity. We have concluded that we do not control a
partially owned entity if the entity is not considered a variable interest entity and the approval of all of the partners/members is
contractually required with respect to major decisions, such as operating and capital budgets, the sale, exchange or other disposition of
real property, the hiring of a chief executive officer, the commencement, compromise or settlement of any lawsuit, legal proceeding or
arbitration or the placement of new or additional financing secured by assets of the venture. We account for investments on the equity
method when the requirements for consolidation are not met, and we have significant influence over the operations of the investee.
Equity method investments are initially recorded at cost and subsequently adjusted for our share of net income or loss and cash
contributions and distributions each period. Investments that do not qualify for consolidation or equity method accounting are
accounted for on the cost method. Investments in partially owned entities are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is measured based on the excess of the
carrying amount of an investment over its estimated fair value. Impairment analyses are based on current plans, intended holding
periods and available information at the time the analyses are prepared. In the years ended December 31, 2011, 2010 and 2009, we
recognized non-cash impairment losses on investments in partially owned entities aggregating $13,794,000, $11,481,000 and
$17,820,000, respectively.
130
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Basis of Presentation and Significant Accounting Policies – continued
Identified Intangibles: We record acquired intangible assets (including acquired above-market leases, tenant relationships and
acquired in-place leases) and acquired intangible liabilities (including below–market leases) at their estimated fair value separate and
apart from goodwill. We amortize identified intangibles that have finite lives over the period they are expected to contribute directly
or indirectly to the future cash flows of the property or business acquired. Intangible assets that are subject to amortization are
reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An
impairment loss is measured based on the excess of carrying amount of the identified intangible over its estimated fair value. As of
December 31, 2011 and 2010, the carrying amounts of identified intangible assets were $319,704,000 and $346,157,000, respectively.
The carrying amounts of identified intangible liabilities, a component of “deferred credit” on our consolidated balance sheets, were
$467,187,000 and $521,372,000, respectively.
Mezzanine Loans Receivable: We invest in mezzanine loans of entities that have significant real estate assets. These
investments, which are subordinate to the mortgage loans secured by the real property, are generally secured by pledges of the equity
interests of the entities owning the underlying real estate. We record these investments at the stated principal amount net of any
unamortized discount or premium. We accrete or amortize any discount or premium over the life of the related receivable utilizing the
effective interest method or straight-line method, if the result is not materially different. We evaluate the collectibility of both interest
and principal of each of our loans whenever events or changes in circumstances indicate such amounts may not be recoverable. A loan
is impaired when it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a
loan is impaired, the amount of the loss accrual is calculated by comparing the carrying amount of the investment to the present value
of expected future cash flows discounted at the loan’s effective interest rate, or as a practical expedient, to the value of the collateral if
the loan is collateral dependent. Interest on impaired loans is recognized when received in cash. In the year ended December 31,
2009 we recorded a $190,738,000 loss accrual on our portfolio of mezzanine loans, of which $72,270,000 and $53,100,000 was
reversed in 2011 and 2010, respectively.
Cash and Cash Equivalents: Cash and cash equivalents consist of highly liquid investments with original maturities of three
months or less. The majority of our cash and cash equivalents are held at major commercial banks which may at times exceed the
Federal Deposit Insurance Corporation limit. To date, we have not experienced any losses on our invested cash.
Restricted Cash: Restricted cash consists of security deposits, cash restricted in connection with our deferred compensation plan
and cash escrowed under loan agreements for debt service, real estate taxes, property insurance and capital improvements.
Allowance for Doubtful Accounts: We periodically evaluate the collectibility of amounts due from tenants and maintain an
allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under the lease
agreements. We also maintain an allowance for receivables arising from the straight-lining of rents. This receivable arises from
earnings recognized in excess of amounts currently due under the lease agreements. Management exercises judgment in establishing
these allowances and considers payment history and current credit status in developing these estimates. As of December 31, 2011 and
2010, we had $43,241,000 and $62,979,000, respectively, in allowances for doubtful accounts. In addition, as of December 31, 2011
and 2010, we had $4,046,000 and $7,316,000, respectively, in allowances for receivables arising from the straight-lining of rents.
Deferred Charges: Direct financing costs are deferred and amortized over the terms of the related agreements as a component of
interest expense. Direct costs related to successful leasing activities are capitalized and amortized on a straight line basis over the lives
of the related leases. All other deferred charges are amortized on a straight line basis, which approximates the effective interest rate
method, in accordance with the terms of the agreements to which they relate.
Stock-Based Compensation: Stock-based compensation consists of awards to certain employees and officers and consists of
stock options, restricted stock, restricted Operating Partnership units and out-performance plan awards. We account for all stock-
based compensation in accordance with ASC 718, Compensation – Stock Compensation.
131
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Basis of Presentation and Significant Accounting Policies – continued
Revenue Recognition: We have the following revenue sources and revenue recognition policies:
• Base Rent — income arising from tenant leases. These rents are recognized over the non-cancelable term of the related leases
on a straight-line basis which includes the effects of rent steps and rent abatements under the leases. We commence rental
revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready for its
intended use. In addition, in circumstances where we provide a tenant improvement allowance for improvements that are
owned by the tenant, we recognize the allowance as a reduction of rental revenue on a straight-line basis over the term of the
lease.
•
Percentage Rent — income arising from retail tenant leases that is contingent upon tenant sales exceeding defined thresholds.
These rents are recognized only after the contingency has been removed (i.e., when tenant sales thresholds have been
achieved).
• Hotel Revenue — income arising from the operation of the Hotel Pennsylvania which consists of rooms revenue, food and
beverage revenue, and banquet revenue. Income is recognized when rooms are occupied. Food and beverage and banquet
revenue is recognized when the services have been rendered.
• Trade Shows Revenue — income arising from the operation of trade shows, including rentals of booths. This revenue is
recognized when the trade shows have occurred.
• Expense Reimbursements — revenue arising from tenant leases which provide for the recovery of all or a portion of the
operating expenses and real estate taxes of the respective property. This revenue is accrued in the same periods as the
expenses are incurred.
• Management, Leasing and Other Fees — income arising from contractual agreements with third parties or with partially
owned entities. This revenue is recognized as the related services are performed under the respective agreements.
• Cleveland Medical Mart — revenue arising from the development of the Cleveland Medical Mart. This revenue is
recognized as the related services are performed under the respective agreements using the criteria set forth in ASC 605-25,
Multiple Element Arrangements, as we are providing development, marketing, leasing, and other property management
services.
Condominium Units Held For Sale: Condominium units held for sale are carried at the lower of cost or fair value less costs to
sell. As of December 31, 2011 and 2010, condominiums held for sale, which are included in “other assets” on our consolidated
balance sheet, aggregate $60,785,000 and $84,397,000, respectively and consist of substantially completed units at our Granite Park in
Pasadena, The Bryant in Boston and our 40 East 66th Street property in Manhattan. Revenue from condominium unit sales is
recognized upon closing of the sale (the “completed contract method”), as all conditions for full profit recognition have been met at
that time. We use the relative sales value method to allocate costs to individual condominium units. Net gains on sales of
condominiums units are included in “net gains on disposition of wholly owned and partially owned assets” on our consolidated
statements of income. In the years ended December 31, 2010 and 2009, we recognized non-cash impairment losses related to certain
of these condominiums aggregating $30,013,000 and $13,667,000, respectively, based on our assessments of the expected net sales
proceeds associated with these condominium projects. These losses are included in “tenant buy-outs, impairment losses and other
acquisition related costs” on our consolidated statements of income.
132
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Basis of Presentation and Significant Accounting Policies – continued
Derivative Instruments and Hedging Activities: ASC 815, Derivatives and Hedging, as amended, establishes accounting and
reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging
activities. As of December 31, 2011 and 2010, our derivative instruments consisted primarily of a portion of our investment in J.C. Penney
common shares (see Note 4 – Marketable Securities and Derivative Instruments) and interest rate swaps. We record all derivatives on the
balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the
resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment
attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to
variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.
For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk
are recognized in earnings. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative
is initially reported in other comprehensive income (loss) (outside of earnings) and subsequently reclassified to earnings when the hedged
transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. We
assess the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging
instrument with the changes in fair value or cash flows of the designated hedged item or transaction. For derivatives not designated as hedges,
changes in fair value are recognized in earnings.
Income Per Share: Basic income per share is computed based on weighted average shares outstanding. Diluted income per share
considers the effect of all potentially dilutive share equivalents, including outstanding employee stock options, restricted shares and
convertible or redeemable securities.
Income Taxes: We operate in a manner intended to enable us to continue to qualify as a REIT under Sections 856-860 of the Internal
Revenue Code of 1986, as amended. Under those sections, a REIT which distributes at least 90% of its REIT taxable income as a dividend to
its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed
to its shareholders. We distribute to shareholders 100% of taxable income and therefore, no provision for Federal income taxes is required.
Dividends distributed for the year ended December 31, 2011, were characterized, for federal income tax income tax purposes, as 93.2%
ordinary income and 6.8% as long term capital gain. Dividend distributions for the year ended December 31, 2010, were characterized, for
Federal income tax purposes, as 95.9% ordinary income, 2.8% long-term capital gain and 1.3% return of capital. Dividend distributions for
the year ended December 31, 2009 were characterized, for Federal income tax purposes, as 63.9% ordinary income, 0.9% long-term capital
gain and 35.2% return of capital.
We have elected to treat certain consolidated subsidiaries, and may in the future elect to treat newly formed subsidiaries, as taxable
REIT subsidiaries pursuant to an amendment to the Internal Revenue Code that became effective January 1, 2001. Taxable REIT subsidiaries
may participate in non-real estate related activities and/or perform non-customary services for tenants and are subject to Federal and State
income tax at regular corporate tax rates. Our taxable REIT subsidiaries had a combined current income tax liability of approximately
$26,645,000 and $24,858,000 at December 31, 2011 and 2010, respectively, and have immaterial differences between the financial reporting
and tax basis of assets and liabilities.
The following table reconciles net income attributable to common shareholders to estimated taxable income for the years ended
December 31, 2011, 2010 and 2009.
(Amounts in thousands)
Net income attributable to common shareholders
Book to tax differences (unaudited):
Depreciation and amortization
Mezzanine loans receivable
Straight-line rent adjustments
Earnings of partially owned entities
Stock options
Sale of real estate
Derivatives
Other, net
Estimable taxable income
For the Year Ended December 31,
2010
2009
2011
$
601,771 $
596,731 $
49,093
225,802
(82,512)
(38,800)
(96,178)
(27,697)
(18,766)
(12,160)
(6,223)
545,237 $
216,473
(104,727)
(70,606)
(62,315)
(48,399)
12,899
(121,120)
48,915
467,851 $
247,023
171,380
(83,959)
(82,382)
(32,643)
3,923
-
81,936
354,371
$
The net basis of our assets and liabilities for tax reporting purposes is approximately $3.6 billion lower than its amount reported in our
consolidated financial statements.
133
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. Vornado Capital Partners Real Estate Fund (the “Fund”)
In February 2011, the Fund’s subscription period closed with an aggregate of $800,000,000 of capital commitments, of which we
committed $200,000,000. We are the general partner and investment manager of the Fund, which has an eight-year term and a three-
year investment period. During the investment period, which concludes in July 2013, the Fund is our exclusive investment vehicle for
all investments that fit within its investment parameters, including debt, equity and other interests in real estate, and excluding (i)
investments in vacant land and ground-up development; (ii) investments acquired by merger or primarily for our securities or
properties; (iii) properties which can be combined with or relate to our existing properties; (iv) securities of commercial mortgage loan
servicers and investments derived from any such investments; (v) non-controlling interests in equity and debt securities; and (vi)
investments located outside of North America. The Fund is accounted for under the AICPA Investment Company Guide and its
investments are reported on its balance sheet at fair value, with changes in value each period recognized in earnings. We consolidate
the accounts of the Fund into our consolidated financial statements, retaining the fair value basis of accounting.
During 2011, the Fund made three investments (described below) aggregating $248,500,000 and exited two investments. As of
December 31, 2011, the Fund has five investments with an aggregate fair value of approximately $346,650,000, or $11,995,000 in
excess of cost, and has remaining unfunded commitments of $416,600,000, of which our share is $104,150,000.
One Park Avenue
On March 1, 2011, the Fund as a co-investor (64.7% interest), together with Vornado (30.3% interest), acquired a 95% interest
in One Park Avenue, a 932,000 square foot office building located between 32nd and 33rd Streets in New York, for $374,000,000. The
purchase price consisted of $137,000,000 in cash and 95% of a $250,000,000 five-year mortgage that bears interest at 5.0%. The
Fund accounts for its 64.7% interest in the property at fair value in accordance with the AICPA Audit and Accounting Guide for
Investment Companies. We account for our directly owned 30.3% equity interest under the equity method of accounting.
Crowne Plaza Times Square
On December 16, 2011, the Fund formed a joint venture with the owner of the property to recapitalize the Crowne Plaza Hotel in
Times Square. The property is located at 48th Street and Broadway in Times Square and is comprised of a 795-key hotel, 14,000
square feet of prime retail space, 212,000 square feet of office space, nine large signage offerings, a 159-space parking garage and a
health club. The joint venture plans to reconfigure and reposition the retail and office space as well as add additional signage.
Vornado will manage and lease the commercial components of the property and the joint venture partner will asset manage the hotel.
This transaction was initiated by us in May 2011, when the Fund acquired a $34,000,000 mezzanine position in the junior most
tranche of the property’s mezzanine debt. In December 2011, the Fund contributed $31,000,000 and its partner contributed
$22,000,000 of new capital to pay down third party debt and for future capital expenditures. The new capital was contributed in the
form of debt that is convertible into preferred equity that receives a priority return and then will receive a profit participation. The
Fund has an economic interest of approximately 38% in the property. The Fund’s investment is subordinate to the property’s
$259,000,000 of senior debt which matures in December 2013, with a one-year extension option.
11 East 68th Street
On December 29, 2011, the Fund committed to acquire the retail portion of 11 East 68th Street, an 11-story residential and retail
property located on Madison Avenue and 68th Street, for $50,500,000. The retail portion of the property consists of two retail units
aggregating 5,000 square feet. The Fund provided $21,200,000 at closing and will provide the remaining $29,300,000 over the next
two years. In addition, the Fund has also provided a $21,000,000 mezzanine loan on the residential portion of the property, which
bears paid-in-kind interest at 15%, matures in three years and has a one-year extension option.
134
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. Vornado Capital Partners Real Estate Fund (the “Fund”) - continued
Below is a summary of income (loss) from the Fund for the years ended December 31, 2011, 2010 and 2009.
(Amounts in thousands)
Income (loss) before net realized/unrealized gains
Net realized gains
Net unrealized gains
Income (loss) from Real Estate Fund
Less:
For the Year Ended December 31,
2010
2009
2011
$
5,500 $
5,391
11,995
22,886
(303) $
-
-
(303)
806
503 $
-
-
-
-
-
-
(Income) loss attributable to noncontrolling interests
Income from Real Estate Fund attributable to Vornado (1)
$
(13,598)
9,288 $
(1) Excludes $2,695 and $248 of management, leasing and development fees in the years ended December 31, 2011 and 2010, respectively,
which are included as a component of "fee and other income" on our consolidated statements of income.
4. Marketable Securities and Derivative Instruments
Marketable Securities
Our portfolio of marketable securities is comprised of debt and equity securities that are classified as available-for-sale.
Available-for-sale securities are presented on our consolidated balance sheets at fair value. Gains and losses resulting from the mark-
to-market of these securities are included in “other comprehensive income (loss).” Gains and losses are recognized in earnings only
upon the sale of the securities and are recorded based on the weighted average cost of such securities.
We evaluate our portfolio of marketable securities for impairment each reporting period. For each of the securities in our
portfolio with unrealized losses, we review the underlying cause of the decline in value and the estimated recovery period, as well as
the severity and duration of the decline. In our evaluation, we consider our ability and intent to hold these investments for a
reasonable period of time sufficient for us to recover our cost basis. We also evaluate the near-term prospects for each of these
investments in relation to the severity and duration of the decline. In 2009, we concluded that certain of our investments in marketable
securities were “other-than-temporarily” impaired and recognized a $3,361,000 impairment loss. This loss is included as a component
of “interest and other investment income (loss), net” on our consolidated statement of income. Our conclusion was based on the
severity and duration of the decline in the market value of the securities and our inability to forecast a recovery in the near term. No
impairment losses were recognized in the years ended December 31, 2011 and 2010. During 2011, 2010 and 2009 we sold certain
marketable securities for aggregate proceeds of $69,559,000, $281,486,000, and $64,355,000, respectively resulting in net gains of
$5,020,000, $22,604,000, and $3,834,000, respectively, which are included as a component of “net gain on disposition of wholly
owned and partially owned assets” on our consolidated statements of income.
135
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. Marketable Securities and Derivative Instruments - continued
Below is a summary of our marketable securities portfolio as of December 31, 2011 and 2010.
As of December 31, 2011
GAAP
Cost
Fair Value
Maturity
Unrealized
Gain
Maturity
As of December 31, 2010
GAAP
Cost
Fair Value
Unrealized
Gain
Equity securities:
J.C. Penney
Other
Debt securities
$
n/a
n/a
04/13 - 10/18
$
653,228 $
29,544
58,549
741,321 $
591,069 $
13,561
54,965
659,595 $
62,159
15,983
3,584
81,726
$
n/a
n/a
08/11 - 10/18
$
601,303 $
46,545
118,268
766,116 $
591,069 $
25,778
104,180
721,027 $
10,234
20,767
14,088
45,089
Investment in J.C. Penney Company, Inc. (“J.C. Penney”) (NYSE: JCP)
We own 23,400,000 J.C. Penney common shares, or 11.0% of its outstanding common shares. Below are the details of our
investment.
We own 18,584,010 common shares at an average economic cost of $25.75 per share or $478,532,000 in the aggregate. As of
December 31, 2011, these shares have an aggregate fair value of $653,228,000, based on J.C. Penney’s closing share price of $35.15
per share at December 31, 2011. Of these shares, 15,500,000 were acquired through the exercise of a call option that was acquired on
September 28, 2010 and settled on November 9, 2010. During the period in which the call option was outstanding and classified as a
derivative instrument, we recognized $112,537,000 of income. Upon exercise of the call option, the GAAP basis of the 18,584,010
common shares we own increased to $31.81 per share, or $591,069,000 in the aggregate. These shares are included in marketable
equity securities on our consolidated balance sheet and are classified as “available-for-sale.” In the year ended December 31, 2011,
we recognized a $51,925,000 gain from the mark-to-market of these shares, which is included in “other comprehensive income
(loss),” based on the difference between the carrying amount of these shares of $601,303,000 at December 31, 2010 and the fair value
of $653,228,000 at December 31, 2011.
We also own an economic interest in 4,815,990 J.C. Penney common shares through a forward contract executed on October 7,
2010, at a weighted average strike price of $28.80 per share, or $138,682,000 in the aggregate. The contract may be settled, at our
election, in cash or common shares, in whole or in part, at any time prior to October 9, 2012. The counterparty may accelerate
settlement, in whole or in part, upon one year’s notice to us. The contract is a derivative instrument that does not qualify for hedge
accounting treatment. Mark-to-market adjustments on the underlying common shares are recognized in “interest and other investment
income (loss), net” on our consolidated statements of income. In the years ended December 31, 2011 and 2010, we recognized gains
of $12,984,000 and $17,616,000, respectively, from the mark-to-market of the underlying common shares, based on J.C. Penney’s
closing share price of $35.15 per share and $32.31 per share at December 31, 2011 and 2010, respectively.
On September 16, 2011, we entered into an agreement with J.C. Penney which enables us to increase our beneficial and/or
economic ownership to up to 15.4% of J.C. Penney’s outstanding common shares. We have agreed to vote any common shares we
hold in excess of 9.9% of J.C. Penney’s outstanding common shares in accordance with either the recommendation of the board of
directors of J.C. Penney or in direct proportion to the vote of all other public shareholders of J.C. Penney (excluding shares affiliated
with Pershing Square Capital Management L.P.).
We review our investment in J.C. Penney on a continuing basis. Depending on various factors, including, without limitation,
J.C. Penney’s financial position and strategic direction, actions taken by its board, price levels of its common shares, other investment
opportunities available to us, market conditions and general economic and industry conditions, we may take such actions with respect
to J.C. Penney as we deem appropriate, including (i) purchasing additional common shares or other financial instruments related to
J.C. Penney, subject to our agreement with J.C. Penney as described in the preceding paragraph, or (ii) selling some or all of our
beneficial or economic holdings, or (iii) engaging in hedging or similar transactions.
136
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. Investments in Partially Owned Entities
The following is a summary of condensed combined financial information for all of our partially owned entities, including Toys
“R” Us, Alexander’s, Inc., Lexington Realty Trust and LNR Property Corporation, as of December 31, 2011 and 2010 and for the
years ended December 31, 2011, 2010 and 2009.
(Amounts in thousands)
Balance Sheet:
Assets(1)
Liabilities(1)
Noncontrolling interests
Equity
Income Statement:
Total revenue
Net income
$
December 31,
2011
153,861,000 $
147,854,000
132,000
5,875,000
2010
165,183,000
160,203,000
124,000
4,856,000
For the Year Ended December 31,
2010
15,030,000 $
63,000
2011
15,390,000 $
199,000
2009
14,321,000
103,000
$
(1)
2011 and 2010 includes $127 billion and $142 billion, respectively, of assets and liabilities of LNR related to consolidated CMBS
and CDO trusts which are non-recourse to LNR and its equity holders, including us.
Toys “R” Us (“Toys”)
As of December 31, 2011, we own 32.7% of Toys. The business of Toys is highly seasonal. Historically, Toys’ fourth quarter
net income accounts for more than 80% of its fiscal year net income. We account for our investment in Toys under the equity method
and record our 32.7% share of Toys net income or loss on a one-quarter lag basis because Toys’ fiscal year ends on the Saturday
nearest January 31, and our fiscal year ends on December 31. As of December 31, 2011, the carrying amount of our investment in
Toys does not differ materially from our share of the equity in the net assets of Toys on a purchase accounting basis.
On May 28, 2010, Toys filed a registration statement, as amended, with the SEC for the offering and sale of its common stock.
The offering, if completed, would result in a reduction of our percentage ownership of Toys’ equity. The size of the offering and its
completion are subject to market and other conditions.
In August 2010, in connection with certain financing and refinancing transactions, Toys paid us an aggregate of $9,600,000 for
our share of advisory fees. Since Toys has capitalized these fees and are amortizing them over the term of the related debt, we
recorded the fees as a reduction of the basis of our investment in Toys and will amortize the fees into income over the term of the
related debt.
Below is a summary of Toys’ latest available financial information on a purchase accounting basis:
(Amounts in thousands)
Balance Sheet:
Assets
Liabilities
Toys “R” Us, Inc. equity
Income Statement:
Total revenues
Net income attributable to Toys
Balance as of
October 29, 2011 October 30, 2010
$
13,221,000 $
11,530,000
1,691,000
12,810,000
11,317,000
1,493,000
For the Twelve Months Ended
October 29, 2011 October 30, 2010 October 31, 2009
$
$
13,749,000 $
189,000
13,172,000
216,000
13,956,000
121,000
137
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. Investments in Partially Owned Entities - continued
Alexander’s, Inc. (“Alexander’s”) (NYSE: ALX)
As of December 31, 2011, we own 1,654,068 Alexander’s commons shares, or approximately 32.4% of Alexander’s common
equity. We manage, lease and develop Alexander’s properties pursuant to the agreements described below which expire in March of
each year and are automatically renewable.
As of December 31, 2011 the market value (“fair value” pursuant to ASC 820) of our investment in Alexander’s, based on
Alexander’s 2011 closing share price of $370.03, was $612,055,000, or $422,280,000 in excess of the carrying amount on our
consolidated balance sheet. As of December 31, 2011, the carrying amount of our investment in Alexander’s, excluding amounts
owed to us, exceeds our share of the equity in the net assets of Alexander’s by approximately $59,010,000. The majority of this basis
difference resulted from the excess of our purchase price for the Alexander’s common stock acquired over the book value of
Alexander’s net assets. Substantially all of this basis difference was allocated, based on our estimates of the fair values of Alexander’s
assets and liabilities, to real estate (land and buildings). We are amortizing the basis difference related to the buildings into earnings
as additional depreciation expense over their estimated useful lives. This depreciation is not material to our share of equity in
Alexander’s net income. The basis difference related to the land will be recognized upon disposition of our investment.
Management and Development Agreements
We receive an annual fee for managing Alexander’s and all of its properties equal to the sum of (i) $3,000,000, (ii) 3% of the
gross income from the Kings Plaza Regional Shopping Center, (iii) 2% of the gross income from the Rego Park II Shopping Center,
(iv) $0.50 per square foot of the tenant-occupied office and retail space at 731 Lexington Avenue, and (v) $256,000, escalating at 3%
per annum, for managing the common area of 731 Lexington Avenue.
In addition, we are entitled to a development fee of 6% of development costs, as defined, with a minimum guaranteed payment of
$750,000 per annum. During the years ended December 31, 2011, 2010, and 2009, we recognized $730,000, $711,000 and
$2,710,000, respectively, of development fee income.
Leasing Agreements
We provide Alexander’s with leasing services for a fee of 3% of rent for the first ten years of a lease term, 2% of rent for the
eleventh through twentieth year of a lease term and 1% of rent for the twenty-first through thirtieth year of a lease term, subject to the
payment of rents by Alexander’s tenants. In the event third-party real estate brokers are used, our fee increases by 1% and we are
responsible for the fees to the third-parties. We are also entitled to a commission upon the sale of any of Alexander’s assets equal to
3% of gross proceeds, as defined, for asset sales less than $50,000,000, or 1% of gross proceeds, as defined, for asset sales of
$50,000,000 or more. The total of these amounts is payable to us in annual installments in an amount not to exceed $4,000,000 with
interest on the unpaid balance at one-year LIBOR plus 1.0% (1.78% at December 31, 2011).
Other Agreements
Building Maintenance Services (“BMS”), our wholly-owned subsidiary, supervises the cleaning, engineering and security
services at Alexander’s 731 Lexington Avenue and Kings Plaza properties for an annual fee of the costs for such services plus 6%.
During the years ended December 31, 2011, 2010 and 2009, we recognized $2,970,000, $2,775,000 and $2,552,000 of income,
respectively, under these agreements.
Below is a summary of Alexander’s latest available financial information:
(Amounts in thousands)
Balance Sheet:
Assets
Liabilities
Noncontrolling interests
Stockholders' equity
Income Statement:
Total revenues
Net income attributable to Alexander’s
Balance as of
$
December 31, 2011 December 31, 2010
1,679,000
1,335,000
3,000
341,000
1,771,000
1,408,000
4,000
359,000
$
For the Year Ended
December 31, 2010 December 31, 2009
December 31, 2011
$
254,000
79,000
$
242,000 $
67,000
224,000
132,000
138
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. Investments in Partially Owned Entities - continued
Lexington Realty Trust (“Lexington”) (NYSE: LXP)
As of December 31, 2011, we own 18,468,969 Lexington common shares, or approximately 12.0% of Lexington’s common
equity. We account for our investment in Lexington on the equity method because we believe we have the ability to exercise
significant influence over Lexington’s operating and financial policies, based on, among other factors, our representation on
Lexington’s Board of Trustees and the level of our ownership in Lexington as compared to other shareholders. We record our pro rata
share of Lexington’s net income or loss on a one-quarter lag basis because we file our consolidated financial statements on Form 10-K
and 10-Q prior to the time that Lexington files its financial statements.
Based on Lexington’s December 31, 2011 closing share price of $7.49, the market value (“fair value” pursuant to ASC 820) of our
investment in Lexington was $138,333,000, or $80,931,000 in excess of the December 31, 2011 carrying amount on our consolidated
balance sheet. As of December 31, 2011, the carrying amount of our investment in Lexington was less than our share of the equity in
the net assets of Lexington by approximately $49,200,000. This basis difference resulted primarily from $107,882,000 of non-cash
impairment charges recognized during 2008, partially offset by purchase accounting for our acquisition of an additional 8,000,000
common shares of Lexington in October 2008, of which the majority relates to our estimate of the fair values of Lexington’s real
estate (land and buildings) as compared to the carrying amounts in Lexington’s consolidated financial statements. The basis
difference related to the buildings is being amortized over their estimated useful lives as an adjustment to our equity in net income or
loss of Lexington. This amortization is not material to our share of equity in Lexington’s net income or loss. The basis difference
attributable to the land will be recognized upon disposition of our investment.
Below is a summary of Lexington’s latest available financial information:
(Amounts in thousands)
Balance Sheet:
Assets
Liabilities
Noncontrolling interests
Shareholders’ equity
Income Statement:
Total revenues
Net loss attributable to Lexington
LNR Property Corporation (“LNR”)
$
Balance as of
September 30, 2011 September 30, 2010
3,385,000
2,115,000
71,000
1,199,000
3,164,000 $
1,888,000
59,000
1,217,000
For the Twelve Months Ended September 30,
2010
2011
2009
$
335,000 $
(81,000)
330,000 $
(90,000)
375,000
(178,000)
As of December 31, 2011, we own a 26.2% equity interest in LNR, which we acquired in July 2010. We account for our
investment in LNR under the equity method and record our 26.2% share of LNR’s net income or loss on a one-quarter lag basis
because we file our consolidated financial statements on Form 10-K and 10-Q prior to receiving LNR’s consolidated financial
statements.
LNR consolidates certain commercial mortgage-backed securities (“CMBS”) and Collateralized Debt Obligation (“CDO”) trusts
for which it is the primary beneficiary. The assets of these trusts (primarily commercial mortgage loans), which aggregate
approximately $127 billion as of September 30, 2011, are the sole source of repayment of the related liabilities, which are non-
recourse to LNR and its equity holders, including us. Changes in the fair value of these assets each period are offset by changes in the
fair value of the related liabilities through LNR’s consolidated income statement. As of December 31, 2011, the carrying amount of
our investment in LNR does not materially differ from our share of LNR’s equity.
139
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. Investments in Partially Owned Entities - continued
Below is a summary of LNR’s latest available financial information:
(Amounts in thousands)
Balance Sheet:
Assets
Liabilities
Noncontrolling interests
LNR Property Corporation equity
Income Statement:
Total revenue
Net income attributable to LNR
280 Park Avenue Joint Venture
Balance as of
September 30, 2011 September 30, 2010
143,266,000
$
142,720,000
37,000
509,000
128,536,000 $
127,809,000
55,000
672,000
For the Twelve
Months Ended
For the Period
July 29, 2010 to
September 30, 2011 September 30, 2010
23,000
$
8,000
208,000 $
224,000
On March 16, 2011, we formed a 50/50 joint venture with SL Green Realty Corp to own the mezzanine debt of 280 Park Avenue,
a 1.2 million square foot office building located between 48th and 49th Streets in Manhattan (the “Property”). We contributed our
mezzanine loan with a face amount of $73,750,000, and they contributed their mezzanine loans with a face amount of $326,250,000 to
the joint venture. We equalized our interest in the joint venture by paying our partner $111,250,000 in cash and assuming
$15,000,000 of their debt. On May 17, 2011, as part of the recapitalization of the Property, the joint venture contributed its debt
position for 99% of the common equity of a new joint venture which owns the Property. The new joint venture’s investment is
subordinate to $710,000,000 of third party debt. The new joint venture expects to spend $150,000,000 for re-tenanting and
repositioning the Property. We account for our 49.5% equity interest in the Property under the equity method of accounting from the
date of recapitalization.
Independence Plaza
On June 17, 2011, a joint venture in which we are a 51% partner, invested $55,000,000 in cash (of which we contributed
$35,000,000) to acquire a face amount of $150,000,000 of mezzanine loans and a $35,000,000 participation in a senior loan on
Independence Plaza, a residential complex comprised of three 39-story buildings in the Tribeca submarket of Manhattan. We share
control over major decisions with our joint venture partner. We account for our 51% interest in the joint venture under the equity
method of accounting from the date of acquisition.
666 Fifth Avenue Office
On December 16, 2011, we formed a joint venture with an affiliate of the Kushner Companies to recapitalize the office portion of
666 Fifth Avenue, a 39-story, 1.4 million square foot Class A office building in Manhattan, located on the full block front of Fifth
Avenue between 52nd and 53rd Street. We acquired a 49.5% interest in the property from the Kushner Companies, the current owner.
In connection therewith, the existing $1,215,000,000 mortgage loan was modified by LNR, the special servicer, into a $1,100,000,000
A-Note and a $115,000,000 B-Note and extended to February 2019; and a portion of the current pay interest was deferred to the B-
Note. We and the Kushner Companies have committed to lend the joint venture an aggregate of $110,000,000 (of which our share is
$80,000,000) for tenant improvements and working capital for the property, which is senior to the $115,000,000 B-Note. In addition,
we have provided the A-Note holders a limited recourse and cooperation guarantee of up to $75,000,000 if an event of default occurs
and is ongoing. We account for our 49.5% interest in the property under the equity method of accounting from the date of
recapitalization.
140
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. Investments in Partially Owned Entities - continued
Below is a schedule of our investments in partially owned entities as of December 31, 2011 and 2010.
(Amounts in thousands)
Investments:
Toys
Alexander’s
Lexington
LNR
Percentage
Ownership
32.7 %
32.4 %
12.0 %
26.2 %
$
$
As of December 31,
2011
2010
506,809
$
447,334
189,775
$
186,811
57,402
57,270
174,408
132,973
India real estate ventures
4.0%-36.5%
80,499
127,193
Partially owned office buildings:
280 Park Avenue (see page 140)
West 57th Street properties
Rosslyn Plaza
One Park Avenue (see page 134)
Warner Building and 1101 17th Street
Other partially owned office buildings (1)
Other equity method investments:
Verde Realty Operating Partnership
Independence Plaza (see page 140)
Downtown Crossing, Boston
Monmouth Mall
Other equity method investments (2)
49.5 %
50.0 %
43.7% -50.4%
30.3 %
55.0 %
Various
8.3 %
51.0 %
50.0 %
50.0 %
Various
184,516
58,529
53,333
47,568
23,122
61,898
59,801
48,511
46,691
7,536
140,061
-
58,963
52,689
-
37,741
36,487
59,326
-
46,147
6,251
125,821
$
1,233,650
$
927,672
___________________________________
(1)
Includes interests in 330 Madison Avenue (25.0%), 666 Fifth Avenue Office (49.5%), 825 Seventh Avenue (50.0%) and Fairfax Square
(20.0%).
(2) Includes interests in 85 10th Avenue Associates, Farley Project, Suffolk Downs, Dune Capital L.P. and others.
141
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. Investments in Partially Owned Entities – continued
Below is a schedule of income recognized from investments in partially owned entities for the years ended December 31, 2011,
2010 and 2009.
(Amounts in thousands)
Our Share of Net Income (Loss):
For the Year Ended December 31,
2010
2009
2011
Toys - 32.7% interest
Equity in net income before income taxes(1)
Income tax benefit
Equity in net income
Non-cash purchase price accounting adjustments
Interest and other income
Alexander’s - 32.4% interest
Equity in net income before income taxes and reversal of
stock appreciation rights compensation expense ("SARs")
Income tax benefit and reversal of SARs
Equity in net income
Management, leasing and development fees
Lexington - 12.0% interest in 2011, 12.8% interest in 2010
and 15.2% interest in 2009 (2)
LNR - 26.2% interest (acquired in July 2010) (3)
India real estate ventures - 4.0% to 36.5% interest (4)
Partially owned office buildings:
280 Park Avenue - 49.5% interest (acquired in May 2011)
West 57th Street properties - 50.0% interest (5)
Rosslyn Plaza - 43.7% to 50.4% interest
One Park Avenue - 30.3% interest (acquired in March 2011)
Warner Building and 1101 17th Street - 55.0% interest
(deconsolidated in October 2010 upon sale of a 45.0% interest) (6)
Other partially owned office buildings
Other equity method investments
Verde Realty Operating Partnership - 8.3% interest (7)
Independence Plaza - 51.0% interest (acquired in June 2011)
Downtown Crossing, Boston - 50.0% interest (8)
Monmouth Mall - 50.0% interest
Other equity method investments (9)
$
___________________________________
(1) 2009 includes $10,200 for our share of income from a litigation settlement.
(2)
$
$
38,460
1,132
39,592
-
8,948
48,540
$
$
$
25,013
$
-
25,013
9,115
34,128
8,351
58,786
(14,881)
(18,079)
876
2,193
(1,142)
(16,135)
10,017
1,661
2,457
(1,461)
2,556
2,443
71,770
$
16,401
45,418
61,819
-
9,805
71,624
20,059
-
20,059
9,125
29,184
11,018
1,973
2,581
-
(10,990)
(2,419)
-
72
4,436
(537)
-
(1,155)
1,952
(13,677)
22,438
$
$
$
$
58,416
13,185
71,601
13,946
6,753
92,300
17,991
24,773
42,764
10,765
53,529
(25,665)
-
(1,636)
-
468
4,870
-
-
4,823
(19,978)
-
(10,395)
1,789
(27,715)
(19,910)
Includes net gains of $9,760 and $13,710 in 2011 and 2010, respectively, resulting from Lexington's stock issuances. 2009 includes
$19,121 for our share of impairment losses recorded by Lexington.
2011 includes $27,377 of income comprised of (i) $12,380 for an income tax benefit, (ii) $8,977 of a tax settlement gain, and (iii) $6,020 of
net gains from asset sales.
(3)
(4) 2011 includes $13,794 for our share of an impairment loss.
(5) 2010 includes $11,481 of impairment losses.
(6)
2011 includes $9,022 for our share of expense, primarily for straight-line rent reserves and the write-off of tenant improvements in
connection with a tenant's bankruptcy at the Warner Building.
(7) 2009 includes $14,515 of impairment losses.
(8) 2009 includes $7,650 of expense for our share of a lease termination payment.
(9) 2011 includes a $12,525 net gain from Suffolk Downs' sale of a partial interest and 2009 includes $3,305 of impairment losses.
142
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. Investments in Partially Owned Entities - continued
Below is a summary of the debt of our partially owned entities as of December 31, 2011 and 2010; none of which is recourse to
us.
(Amounts in thousands)
Interest
Rate at
December 31,
2011
100% of
Partially Owned Entities’ Debt at
December 31, December 31,
2011
2010
Maturity
Toys (32.7% interest) (as of October 29, 2011 and October 30, 2010,
respectively):
Senior unsecured notes (Face value – $950,000)
$1.85 billion credit facility
Senior unsecured notes (Face value – $725,000)
$700 million secured term loan facility
Senior U.K. real estate facility
$400 million secured term loan facility
7.875% senior notes (Face value – $400,000)
7.375% senior secured notes (Face value - $350,000)
7.375% senior notes (Face value – $400,000)
Japan bank loans
Spanish real estate facility
Junior U.K. real estate facility
Japan borrowings
French real estate facility
European and Australian asset-based revolving credit facility
8.750% debentures (Face value – $21,600)
7.625% bonds (Face value – $500,000)
Other
07/17
08/15
12/17
09/16
04/13
05/18
04/13
09/16
10/18
$
10.75 %
2.77 %
8.50 %
6.00 %
5.02 %
5.25 %
9.50 %
7.38 %
9.99 %
03/12-02/16 1.85%-2.85%
02/13
04/13
06/12
02/13
03/16
09/21
n/a
Various
4.51 %
6.81%-7.84%
1.06 %
4.51 %
2.88 %
9.17 %
n/a
Various
Alexander’s (32.4% interest):
731 Lexington Avenue mortgage note payable, collateralized by
the office space
731 Lexington Avenue mortgage note payable, collateralized by
the retail space
Rego Park II Shopping Center mortgage note payable(1)
Kings Plaza Regional Shopping Center mortgage note payable (2)
Rego Park I Shopping Center mortgage note payable
Paramus mortgage note payable
02/14
07/15
11/18
06/16
03/12
10/18
5.33 %
4.93 %
2.15 %
2.24 %
0.75 %
2.90 %
930,382 $
750,000
716,583
684,217
562,004
395,195
391,520
361,561
348,537
189,525
180,174
97,964
94,968
86,919
64,520
21,089
-
172,363
6,047,521
928,045
519,810
715,577
689,757
561,559
-
386,167
350,000
343,528
180,500
179,511
98,266
141,360
86,599
25,767
21,054
495,943
156,853
5,880,296
339,890
351,751
320,000
274,796
250,000
78,246
68,000
1,330,932
320,000
277,200
151,214
78,246
68,000
1,246,411
Lexington (12.0% and 12.8% interest) (as of September 30, 2011 and
September 30, 2010, respectively):
Mortgage loans collateralized by Lexington’s real estate
LNR (26.2% interest) (as of September 30, 2011 and
September 30, 2010, respectively):
Mortgage notes payable
Liabilities of consolidated CMBS and CDO trusts
2012-2037
5.80 %
1,712,750
1,927,729
2014-2043
n/a
4.54 %
5.32 %
353,504
127,348,336
127,701,840
508,547
142,001,333
142,509,880
(1) On November 30, 2011, Alexander's completed a $275,000 refinancing of this loan. The seven-year loan bears interest at LIBOR plus
1.85% and amortizes based on a 30-year schedule.
(2) On June 10, 2011, Alexander's completed a $250,000 refinancing of this loan. The five-year interest only loan is at LIBOR plus 1.70%.
143
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. Investments in Partially Owned Entities - continued
(Amounts in thousands)
Partially owned office buildings:
666 Fifth Avenue Office (49.5% interest) mortgage note payable
280 Park Avenue (49.5% interest) mortgage notes payable
Warner Building (55.0% interest) mortgage note payable
One Park Avenue (30.3% interest) mortgage note payable
330 Madison Avenue (25.0% interest) mortgage note payable
Fairfax Square (20.0% interest) mortgage note payable
Rosslyn Plaza (43.7% to 50.4% interest) mortgage note payable
330 West 34th Street (34.8% interest) mortgage note payable,
collateralized by land
West 57th Street (50.0% interest) mortgage note payable
825 Seventh Avenue (50.0% interest) mortgage note payable
Other mortgage notes payable collateralized by real estate(1)
India Real Estate Ventures:
TCG Urban Infrastructure Holdings (25.0% interest) mortgage notes
payable, collateralized by the entity’s real estate
Other:
Verde Realty Operating Partnership (8.3% interest) mortgage notes
payable, collateralized by the partnerships’ real estate
Green Courte Real Estate Partners, LLC (8.3% interest) (as of
September 30, 2011 and 2010), mortgage notes payable,
collateralized by the partnerships’ real estate
Monmouth Mall (50.0% interest) mortgage note payable
Wells/Kinzie Garage (50.0% interest) mortgage note payable
Orleans Hubbard Garage (50.0% interest) mortgage note payable
Waterfront Station (2.5% interest)
Other
Interest
Rate at
December 31, December 31,
100% of
Partially Owned Entities’ Debt at
December 31,
Maturity
2011
2011
2010
02/19
06/16
05/16
03/16
06/15
12/14
01/12
07/22
02/14
10/14
n/a
$
6.80 %
6.65 %
6.26 %
5.00 %
1.78 %
7.00 %
1.27 %
5.71 %
4.94 %
8.07 %
n/a
1,035,884 $
737,678
292,700
250,000
150,000
70,974
56,680
50,150
21,864
20,080
-
n/a
n/a
292,700
n/a
150,000
71,764
56,680
50,150
22,922
20,565
139,337
2012-2022
11.87 %
226,534
196,319
2013-2025
6.18 %
340,378
581,086
2012-2018
02/14-09/15
12/17
12/17
n/a
Various
5.63 %
5.32 %
5.00 %
5.00 %
n/a
4.62 %
293,771
173,938
14,792
9,362
-
663,162
296,991
164,474
15,022
9,508
217,106
418,339
(1)
On December 23, 2011, we acquired the 97.5% interest we did not already own in the Executive Tower. Accordingly, we consolidate the
accounts of this property into our consolidated financial statements from the date of acquisition.
Based on our ownership interest in the partially owned entities above, our pro rata share of the debt of these partially owned
entities, was $37,531,298,000 and $40,443,346,000 as of December 31, 2011 and 2010, respectively. Excluding our pro rata share of
LNR’s liabilities related to consolidated CMBS and CDO trusts, which are non-recourse to LNR and its equity holders, including us,
our pro rata share of partially owned entities debt was $4,199,145,000 and $3,275,917,000 at December 31, 2011 and 2010,
respectively.
144
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. Mezzanine Loans Receivable
As of December 31, 2011 and 2010, the carrying amount of mezzanine loans receivable was $133,948,000 and $202,412,000,
respectively, net of allowances of $0 and $73,216,000, respectively. These loans have a weighted average interest rate of 9.53% and
maturities ranging from August 2014 to May 2016.
In the first quarter of 2011, we recognized $72,270,000 of income, representing the difference between the fair value of our 280
Park Avenue Mezzanine Loan of $73,750,000, and its carrying amount of $1,480,000. The $72,270,000 of income, which is included
in “interest and other investment income (loss), net” on our consolidated statement of income, is comprised of $63,145,000 from the
reversal of the loan loss reserve and $9,125,000 of previously unrecognized interest income. Our decision to reverse the loan loss
reserve was based on the increase in value of the underlying collateral. On March 16, 2011, we contributed this mezzanine loan to a
50/50 joint venture with SL Green (see Note 5 – Investments in Partially Owned Entities).
On March 2, 2011, we sold the Tharaldson Lodging Companies mezzanine loan, which had a carrying amount of $60,416,000, for
$70,890,000 in cash and recognized a net gain of $10,474,000. The gain is included as a component of “interest and other investment
income (loss), net” on our consolidated statement of income.
7. Discontinued Operations
In accordance with the provisions of ASC 360, Property, Plant, and Equipment, we have reclassified the revenues and expenses
of properties and businesses sold or held for sale to “income (loss) from discontinued operations” and the related assets and liabilities
to “assets related to discontinued operations” and “liabilities related to discontinued operations” for all periods presented in the
accompanying consolidated financial statements. The net gains resulting from the sale of the properties below are included in
“income (loss) from discontinued operations” on our consolidated statements of income.
On January 6, 2012, we completed the sale of 350 West Mart Center, a 1.2 million square foot office building in Chicago, Illinois,
for $228,000,000 in cash, which resulted in a net gain of $54,200,000 that will be recognized in the first quarter of 2012.
On March 31, 2011, the receiver completed the disposition of the High Point Complex in North Carolina. In connection
therewith, the property and related debt were removed from our consolidated balance sheet and we recognized a net gain of
$83,907,000 on the extinguishment of debt.
On January 12, 2011, we sold 1140 Connecticut Avenue and 1227 25th Street in Washington, DC, for $127,000,000 in cash, which
resulted in a net gain of $45,862,000.
In 2011, we sold three retail properties in separate transactions for an aggregate of $40,990,000 in cash, which resulted in net
gains of $5,761,000.
In December 2010, pursuant to a Court judgment, we sold the fee interest in land located in Arlington County, Virginia, known as
Pentagon Row, to the tenants for an aggregate of $14,992,000 in cash.
In March 2010, we ceased making debt service payments on the mortgage loan secured by the Cannery, a retail property in
California as a result of insufficient cash flow, and the loan went into default. On October 14, 2010, the special servicer foreclosed on
the property, and the property and related debt were removed from our consolidated balance sheet.
On September 1, 2009, we sold 1999 K Street, a newly developed 250,000 square foot office building, in Washington’s Central
Business District, for $207,800,000 in cash, which resulted in a net gain of approximately $41,211,000.
In 2009, we sold 15 retail properties in separate transactions for an aggregate of $55,000,000 in cash which resulted in net gains
aggregating $4,073,000.
145
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. Discontinued Operations- continued
The tables below set forth the assets and liabilities related to discontinued operations at December 31, 2011 and 2010, and their
combined results of operations for the years ended December 31, 2011, 2010 and 2009.
(Amounts in thousands)
Assets Related to
Discontinued Operations as of
December 31,
Liabilities Related to
Discontinued Operations as of
December 31,
2011
2010
2011
2010
350 West Mart Center
Retail properties
High Point
1227 25th Street
1140 Connecticut Avenue
$
$
173,780
77,422
-
-
-
$
162,984
121,837
154,563
43,630
36,271
$
6,361
7,792
-
-
-
Total
$
251,202
$
519,285
$
14,153
$
-
11,730
236,974
-
18,948
267,652
(Amounts in thousands)
Total revenues
Total expenses
Net gain on extinguishment of High Point debt
Net gain on sale of 1140 Connecticut Avenue
and 1227 25th Street
Net gain on sales of other real estate
Impairment losses and litigation loss accrual
For the Year Ended December 31,
2010
2009
2011
$
$
45,745
29,943
15,802
83,907
45,862
5,761
(5,799)
$
82,917
77,511
5,406
-
-
2,506
(15,056)
96,853
78,148
18,705
-
-
45,284
(14,060)
49,929
Income (loss) from discontinued operations
$
145,533
$
(7,144)
$
146
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. Identified Intangible Assets and Liabilities
The following summarizes our identified intangible assets (primarily acquired above-market leases) and liabilities (primarily
acquired below-market leases) as of December 31, 2011 and 2010.
(Amounts in thousands)
Identified intangible assets:
Gross amount
Accumulated amortization
Net
Identified intangible liabilities (included in deferred credit):
Gross amount
Accumulated amortization
Net
Balance as of
December 31,
2011
December 31,
2010
$
$
$
$
679,648 $
(359,944)
319,704 $
841,440 $
(374,253)
467,187 $
681,270
(335,113)
346,157
856,689
(335,317)
521,372
Amortization of acquired below-market leases, net of acquired above-market leases resulted in an increase to rental income of
$62,442,000, $65,542,000 and $70,401,000 for the years ended December 31, 2011, 2010 and 2009, respectively. Estimated annual
amortization of acquired below-market leases, net of acquired above-market leases for each of the five succeeding years commencing
January 1, 2012 is as follows:
(Amounts in thousands)
2012
2013
2014
2015
2016
$
49,032
44,373
37,715
34,590
31,518
Amortization of all other identified intangible assets (a component of depreciation and amortization expense) was $56,922,000,
$59,674,000 and $63,691,000 for the years ended December 31, 2011, 2010 and 2009, respectively. Estimated annual amortization of
all other identified intangible assets including acquired in-place leases, customer relationships, and third party contracts for each of the
five succeeding years commencing January 1, 2012 is as follows:
(Amounts in thousands)
2012
2013
2014
2015
2016
$
46,572
39,355
21,002
16,043
13,507
We are a tenant under ground leases for certain properties. Amortization of these acquired below-market leases, net of above-
market leases resulted in an increase to rent expense of $1,377,000, $2,157,000 and $1,952,000 for the years ended December 31,
2011, 2010 and 2009, respectively. Estimated annual amortization of these below-market leases, net of above-market leases for each
of the five succeeding years commencing January 1, 2012 is as follows:
(Amounts in thousands)
2012
2013
2014
2015
2016
$
1,377
1,377
1,377
1,377
1,377
147
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. Debt
The following is a summary of our debt:
(Amounts in thousands)
Notes and mortgages payable:
Fixed rate:
New York Office:
350 Park Avenue(2)
Two Penn Plaza (3)
1290 Avenue of the Americas
770 Broadway
888 Seventh Avenue
909 Third Avenue
Eleven Penn Plaza(4)
Washington, DC Office:
Skyline Place(5)
River House Apartments
2121 Crystal Drive (6)
Bowen Building
1215 Clark Street, 200 12th Street and 251 18th Street
West End 25 (7)
Universal Buildings
Reston Executive I, II, and III
2011 Crystal Drive
1550 and 1750 Crystal Drive
220 20th Street (8)
1235 Clark Street
2231 Crystal Drive
1750 Pennsylvania Avenue
1225 Clark Street
1800, 1851 and 1901 South Bell Street
Retail:
Cross-collateralized mortgages on 40 strip shopping centers
Montehiedra Town Center
Broadway Mall
828-850 Madison Avenue Condominium
North Bergen (Tonnelle Avenue) (9)
Las Catalinas Mall
510 5th Avenue
Other
Merchandise Mart:
Merchandise Mart
Boston Design Center
Washington Design Center
Other:
555 California Street (10)
Borgata Land (11)
Industrial Warehouses
Total fixed rate notes and mortgages payable
___________________
See notes on page 150.
Interest
Rate at
Balance at
December 31, December 31,
December 31,
Maturity (1)
2011
2011
2010
01/12
03/18
01/13
03/16
01/16
04/15
n/a
02/17
04/15
03/23
06/16
01/25
06/21
04/14
01/13
08/17
11/14
02/18
07/12
08/13
06/12
08/13
n/a
09/20
07/16
07/13
06/18
01/18
11/13
01/16
$
5.48 %
5.13 %
5.97 %
5.65 %
5.71 %
5.64 %
n/a
5.74 %
5.43 %
5.51 %
6.14 %
7.09 %
4.88 %
6.44 %
5.57 %
7.30 %
7.08 %
4.61 %
6.75 %
7.08 %
7.26 %
7.08 %
n/a
4.21 %
6.04 %
5.30 %
5.29 %
4.59 %
6.97 %
5.60 %
03/12-05/36 5.12%-7.30%
430,000 $
425,000
413,111
353,000
318,554
203,217
-
678,000
195,546
150,000
115,022
108,423
101,671
98,239
93,000
80,486
76,624
75,037
51,309
43,819
44,330
26,211
-
585,398
120,000
87,750
80,000
75,000
55,912
31,732
95,541
430,000
277,347
424,136
353,000
318,554
207,045
199,320
678,000
195,546
-
115,022
110,931
-
103,049
93,000
81,362
79,411
-
52,314
46,358
45,132
27,616
10,099
597,138
120,000
90,227
80,000
-
57,737
32,189
97,054
12/16
09/15
n/a
09/21
02/21
n/a
5.57 %
5.02 %
n/a
5.10 %
5.14 %
n/a
5.53 %
550,000
67,350
-
550,000
68,538
43,447
600,000
60,000
-
6,489,282 $
640,911
-
24,358
6,248,841
$
148
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. Debt - continued
(Amounts in thousands)
Notes and mortgages payable:
Variable rate:
New York Office:
Eleven Penn Plaza(4)
Manhattan Mall(12)
866 UN Plaza (13)
Washington, DC Office:
2101 L Street
River House Apartments
2200/2300 Clarendon Boulevard
1730 M and 1150 17th Street
West End 25 (7)
220 20th Street (8)
Retail:
Green Acres Mall
Bergen Town Center
San Jose Strip Center
Beverly Connection (15)
4 Union Square South
Cross-collateralized mortgages on 40 strip
shopping centers (16)
435 Seventh Avenue (17)
Other
Other:
220 Central Park South
Other
Total variable rate notes and mortgages payable
Total notes and mortgages payable
Senior unsecured notes:
Senior unsecured notes due 2015
Senior unsecured notes due 2039 (18)
Senior unsecured notes due 2022(19)
Floating rate senior unsecured notes due 2011
Senior unsecured notes due 2011
Total senior unsecured notes
3.88% exchangeable senior debentures due 2025
(see page 152)
Convertible senior debentures: (see page 152)
2.85% due 2027
3.63% due 2026
Total convertible senior debentures (20)
Unsecured revolving credit facilities:
$1.25 billion unsecured revolving credit facility
($22,085 reserved for outstanding letters of credit) (21)
$1.25 billion unsecured revolving credit facility (21)
Total unsecured revolving credit facilities
___________________________
See notes on the following page.
Maturity (1)
Spread over
LIBOR
L+235
L+55
L+125
L+120
n/a (14)
L+75
L+140
n/a
n/a
L+140
L+150
L+400
L+425 (15)
L+325
L+136 (16)
L+300 (17)
L+375
L+275
n/a
01/19
02/12
05/16
02/13
04/18
01/15
06/14
n/a
n/a
02/13
03/13
03/13
09/14
04/14
09/20
08/14
11/12
10/13
n/a
04/15
10/39
01/22
n/a
n/a
04/12
04/12
n/a
Interest
Rate at
Balance at
December 31, December 31, December 31,
2011
2011
2010
2.60 %
0.83 %
1.69 %
1.50 %
1.53 %
1.03 %
1.69 %
n/a
n/a
1.67 %
1.93 %
4.32 %
4.75 %
3.69 %
2.36 %
5.00 %
4.02 %
3.03 %
n/a
2.30 %
4.75 %
4.25 %
7.88 %
5.00 %
n/a
n/a
5.70 %
$
330,000 $
232,000
44,978
150,000
64,000
53,344
43,581
-
-
325,045
283,590
112,476
100,000
75,000
60,000
51,353
19,876
-
232,000
44,978
150,000
64,000
59,278
43,581
95,220
83,573
335,000
279,044
120,863
100,000
75,000
60,000
51,844
21,862
123,750
-
2,068,993
8,558,275 $
123,750
66,267
2,006,260
8,255,101
499,462 $
460,000
398,199
-
-
1,357,661 $
499,296
460,000
-
23,250
100,382
1,082,928
$
$
$
5.32 %
$
497,898 $
491,000
5.45 %
n/a
5.45 %
$
$
10,168 $
-
10,168 $
9,914
176,499
186,413
06/16
11/16
L+135
L+125
-
1.48 %
1.48 %
$
$
- $
138,000
138,000 $
205,000
669,000
874,000
149
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. Debt - continued
Notes to preceding tabular information (Amounts in thousands):
(1) Represents the extended maturity for certain loans in which we have the unilateral right, ability and intent to extend. In the case of our
convertible and exchangeable debt, represents the earliest date holders may require us to repurchase the debentures.
(2) On January 9, 2012, we completed a $300,000 refinancing of this property. The five-year fixed rate loan bears interest at 3.75% and
amortizes based on a 30-year schedule beginning in the third year. The proceeds of the new loan and $132,000 of existing cash were
used to repay the existing loan and closing costs.
(3) On February 11, 2011, we completed a $425,000 refinancing of this property. The seven-year loan bears interest at LIBOR plus 2.00%,
which was swapped for the term of the loan to a fixed rate of 5.13%. The loan amortizes based on a 30-year schedule beginning in the
fourth year. We retained net proceeds of approximately $139,000, after repaying the existing loan and closing costs.
(4) On December 28, 2011, we completed a $330,000 refinancing of this property. The seven-year loan bears interest at LIBOR plus 2.35%
and amortizes based on a 30-year schedule beginning in the fourth year.
(5)
In February 2012, we notified the lender that this property currently has a 26% vacancy rate, which is expected to increase due to
scheduled lease expirations resulting primarily from the Base Realignment and Closure statute. Based on the projected vacancy and the
significant amount of capital, time and effort to re-tenant this property, we requested that the mortgage loan be placed with the special
servicer.
(6) On February 10, 2011, we completed a $150,000 financing of this property. The 12-year fixed rate loan bears interest at 5.51% and
amortizes based on a 30-year schedule beginning in the third year. This property was previously unencumbered.
(7) On May 11, 2011, we repaid the outstanding balance of the variable-rate construction loan on this property and closed on a $101,671
mortgage at a fixed rate of 4.88%. The loan has a 10-year term and amortizes based on a 30-year schedule beginning in the sixth year.
(8) On January 18, 2011, we repaid the outstanding balance of the variable-rate construction loan on this property and closed on a $76,100
mortgage at a fixed rate of 4.61%. The loan has a seven-year term and amortizes based on a 30-year schedule.
(9) On January 10, 2011, we completed a $75,000 financing of this property. The seven-year fixed rate loan bears interest at 4.59% and
amortizes based on a 25-year schedule beginning in the sixth year. This property was previously unencumbered.
(10) On September 1, 2011, we completed a $600,000 refinancing of this property. The 10-year fixed rate loan bears interest at 5.10% and
amortizes based on a 30-year schedule beginning in the fourth year.
(11) On January 6, 2011, we completed a $60,000 financing of this property. The 10-year fixed rate loan bears interest at 5.14% and
amortizes based on a 30-year schedule beginning in the third year.
(12) We are currently in negotiations to refinance this loan and have extended its maturity date to March 9, 2012.
(13) On May 10, 2011, we refinanced this loan for the same amount. The five-year interest only loan is at LIBOR plus 1.25%.
(14) This loan bears interest at the Freddie Mac Reference Note Rate plus 1.53%.
(15) This loan has a LIBOR floor of 0.50%.
(16) This loan has a LIBOR floor of 1.00%.
(17) This loan has a LIBOR floor of 2.00%.
150
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. Debt - continued
Notes to preceding tabular information (Amounts in thousands):
(18) These notes may be redeemed at our option in whole or in part beginning on October 1, 2014, at a price equal to the principal amount
plus accrued interest.
(19) On November 30, 2011, we completed a public offering of $400,000 aggregate principal amount of 5.0%, ten-year senior unsecured
notes and retained net proceeds of approximately $395,584. The notes were sold at 99.546% of their face amount to yield 5.057%.
(20) The net proceeds from the offering of these debentures were contributed to the Operating Partnership in the form of an inter-company
loan and the Operating Partnership fully and unconditionally guaranteed payment of these debentures. There are no restrictions which
limit the Operating Partnership from making distributions to Vornado and Vornado has virtually no independent assets or operations
outside of the Operating Partnership.
(21) In 2011, we renewed both of our unsecured revolving credit facilities aggregating $2,500,000. The first facility, which was renewed in
June 2011, bears interest on drawn amounts at LIBOR plus 1.35% and has a 0.30% facility fee (drawn or undrawn). The second
facility, which was renewed in November 2011, bears interest on drawn amounts at LIBOR plus 1.25% and has a 0.25% facility fee
(drawn or undrawn). The LIBOR spread and facility fee on both facilities are based on our credit ratings. Both facilities mature in four
years and have one-year extension options.
151
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. Debt – continued
Pursuant to the provisions of ASC 470-20, Debt with Conversion and Other Options, below is a summary of required disclosures
related to our convertible and exchangeable senior debentures.
2.85% Convertible
3.63% Convertible
3.88% Exchangeable
(Amounts in thousands, except per share amounts) Senior Debentures due 2027 Senior Debentures due 2026 Senior Debentures due 2025
December 31,
December 31, December 31, December 31, December 31, December 31,
2011
2011
2010
2011
Balance Sheet:
Principal amount of debt component
Unamortized discount
Carrying amount of debt component
Carrying amount of equity component
Effective interest rate
Maturity date (period through which
discount is being amortized)
Conversion price per share, as adjusted
Number of shares on which the
aggregate consideration to be
delivered upon conversion is
determined
__________________
$
$
$
$
10,233 $
(65)
10,168 $
10,233 $
(319)
9,914 $
956 $
956 $
5.45 %
5.45 %
4/1/12
157.18
- (1)
- $
-
- $
- $
n/a
n/a
n/a
n/a
2010
179,052 $
(2,553)
176,499 $
9,604 $
5.32 %
499,982
(2,084)
497,898
32,301
$
$
$
5.32 %
2010
499,982
(8,982)
491,000
32,301
5.32 %
$
4/15/12
87.17
5,736
(1) Our convertible senior debentures require that upon conversion, the entire principal amount is to be settled in cash, and at our option, any excess
value above the principal amount may be settled in cash or common shares. Based on the December 31, 2011 closing share price of our common
shares and the conversion price in the table above, there was no excess value; accordingly, no common shares would be issued if these securities
were settled on this date. The number of common shares on which the aggregate consideration that would be delivered upon conversion is 65
common shares.
(Amounts in thousands)
Income Statement:
2.85% Convertible Senior Debentures due 2027:
Coupon interest
Discount amortization – original issue
Discount amortization – ASC 470-20 implementation
3.63% Convertible Senior Debentures due 2026:
Coupon interest
Discount amortization – original issue
Discount amortization – ASC 470-20 implementation
3.88% Exchangeable Senior Debentures due 2025:
Coupon interest
Discount amortization – original issue
Discount amortization – ASC 470-20 implementation
For the Year Ended December 31,
2010
2009
2011
$
$
$
$
$
$
292 $
45
209
546 $
553 $
80
374
1,007 $
5,674 $
694
1,859
8,227 $
13,015 $
1,520
4,069
18,604 $
19,374 $
1,628
5,270
26,272 $
19,374 $
1,544
4,999
25,917 $
33,743
4,596
21,514
59,853
32,654
3,606
9,651
45,911
19,428
1,464
4,741
25,633
152
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. Debt – continued
The net carrying amount of properties collateralizing the notes and mortgages payable amounted to $10.4 billion at December 31,
2011. As of December 31, 2011, the principal repayments required for the next five years and thereafter are as follows:
(Amounts in thousands)
Year Ending December 31,
2012
2013
2014
2015
2016
Thereafter
Notes and
Mortgages Payable
Senior Unsecured
Debt and
Revolving Credit
Facilities
$
$
828,404
1,741,750
495,098
538,159
1,576,394
3,366,770
-
-
-
500,000
138,000
860,000
We may refinance our maturing debt as it comes due or choose to repay it.
10. Redeemable Noncontrolling Interests
Redeemable noncontrolling interests on our consolidated balance sheets represent Operating Partnership units held by third
parties and are comprised of Class A units and Series D-10, D-14, D-15 and D-16 (collectively, “Series D”) cumulative redeemable
preferred units. Class A units may be tendered for redemption to the Operating Partnership for cash; we, at our option, may assume
that obligation and pay the holder either cash or Vornado common shares on a one-for-one basis. Because the number of Vornado
common shares outstanding at all times equals the number of Class A units owned by Vornado, the redemption value of each Class A
unit is equivalent to the market value of one Vornado common share, and the quarterly distribution to a Class A unitholder is equal to
the quarterly dividend paid to a Vornado common shareholder. Below are the details of Operating Partnership units held by third-
parties that are included in “redeemable noncontrolling interests” as of December 31, 2011 and 2010.
(Amounts in thousands, except units and
per unit amounts)
Unit Series
Common:
Class A
Perpetual Preferred: (1)
Balance as of
December 31,
Units Outstanding at
December 31,
2011
2010
2011
2010
Preferred or
Per Unit
Annual
Liquidation Distribution
Preference
Rate
$
934,677 $
1,066,974
12,160,771
12,804,202
N/A $
2.76
$
7.00% D-10 Cumulative Redeemable
6.75% D-14 Cumulative Redeemable
6.875% D-15 Cumulative Redeemable
5.00% D-16 Cumulative Redeemable
7.20% D-11 Cumulative Redeemable(2)
$
80,000 $
100,000
45,000
1,000
-
226,000 $
80,000
100,000
45,000
1,000
35,000
261,000
3,200,000
4,000,000
1,800,000
1
-
9,000,001
3,200,000 $
4,000,000 $
1,800,000 $
25.00 $
25.00 $
25.00 $
1 $ 1,000,000.00 $
25.00 $
1,400,000 $
10,400,001
1.75
1.6875
1.71875
50,000.00
1.80
__________________________________
(1) Holders may tender units for redemption to the Operating Partnership for cash at their stated redemption amount; we, at our option, may assume
that obligation and pay the holders either cash or Vornado preferred shares on a one-for-one basis. These units are redeemable at our option at any
time.
(2) In 2011, we redeemed all of the outstanding Series D-11 cumulative redeemable preferred units for $20.00 per unit in cash, or $28,000 in the
aggregate.
153
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. Redeemable Noncontrolling Interests - continued
Redeemable noncontrolling interests on our consolidated balance sheets are recorded at the greater of their carrying amount or
redemption value at the end of each reporting period. Changes in the value from period to period are charged to “additional capital” in
our consolidated statements of changes in equity. Below is a table summarizing the activity of redeemable noncontrolling interests.
(Amounts in thousands)
Balance at December 31, 2009
Net income
Distributions
Conversion of Class A units into common shares, at redemption value
Adjustment to carry redeemable Class A units at redemption value
Redemption of Series D-12 redeemable units
Other, net
Balance at December 31, 2010
Net income
Distributions
Conversion of Class A units into common shares, at redemption value
Adjustment to carry redeemable Class A units at redemption value
Redemption of Series D-11 redeemable units
Other, net
$
1,251,628
55,228
(53,515)
(126,764)
191,826
(13,000)
22,571
1,327,974
55,912
(50,865)
(64,830)
(98,092)
(28,000)
18,578
Balance at December 31, 2011
$
1,160,677
Redeemable noncontrolling interests exclude our Series G convertible preferred units and Series D-13 cumulative redeemable
preferred units, as they are accounted for as liabilities in accordance with ASC 480, Distinguishing Liabilities and Equity, because of
their possible settlement by issuing a variable number of Vornado common shares. Accordingly, the fair value of these units is
included as a component of “other liabilities” on our consolidated balance sheets and aggregated $54,865,000 and $55,097,000 as of
December 31, 2011 and 2010, respectively.
154
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. Shareholders’ Equity
Preferred Shares
The following table sets forth the details of our preferred shares of beneficial interest as of December 31, 2011 and 2010.
(Amounts in thousands, except share and per share amounts)
Preferred Shares
6.5% Series A: authorized 5,750,000 shares
7.0% Series E: authorized 3,450,000 shares
6.75% Series F: authorized 6,000,000 shares
6.625% Series G: authorized 9,200,000 shares
6.75% Series H: authorized 4,600,000 shares
6.625% Series I: authorized 12,050,000 shares
6.875% Series J: authorized 9,850,000 shares
Balance as of
December 31,
Shares Outstanding at
December 31,
2011
2010
2011
2010
Per Share
Liquidation Distribution
Preference
Rate
$
1,787 $
72,248
144,720
193,135
108,549
262,379
238,842
$ 1,021,660 $
2,057
72,248
144,720
193,135
108,549
262,379
-
36,709
3,000,000
6,000,000
8,000,000
4,500,000
10,800,000
9,850,000
40,009 $
3,000,000 $
6,000,000 $
8,000,000 $
4,500,000 $
10,800,000 $
- $
783,088
42,186,709
32,340,009
50.00 $
25.00 $
25.00 $
25.00 $
25.00 $
25.00 $
25.00 $
3.25
1.75
1.6875
1.656
1.6875
1.656
1.71875
On April 20, 2011, we sold 7,000,000 6.875% Series J Cumulative Redeemable Preferred Shares at a price of $25.00 per share, in
an underwritten public offering pursuant to an effective registration statement. On April 21, 2011, the underwriters exercised their
option to purchase an additional 1,050,000 shares to cover over-allotments. On May 5, 2011 and August 5, 2011 we sold an
additional 800,000 and 1,000,000 shares, respectively, at a price of $25.00 per share. We retained aggregate net proceeds of
$238,842,000, after underwriters’ discounts and issuance costs and contributed the net proceeds to the Operating Partnership in
exchange for 9,850,000 Series J Preferred Units (with economic terms that mirror those of the Series J Preferred Shares). Dividends
on the Series J Preferred Shares are cumulative and payable quarterly in arrears. The Series J Preferred Shares are not convertible
into, or exchangeable for, any of our properties or securities. On or after five years from the date of issuance (or sooner under limited
circumstances), we, at our option, may redeem the Series J Preferred Shares at a redemption price of $25.00 per share, plus accrued
and unpaid dividends through the date of redemption. The Series J Preferred Shares have no maturity date and will remain
outstanding indefinitely unless redeemed by us.
Series A Convertible Preferred Shares of Beneficial Interest
Holders of Series A Preferred Shares of beneficial interest are entitled to receive dividends in an amount equivalent to $3.25 per
annum per share. These dividends are cumulative and payable quarterly in arrears. The Series A Preferred Shares are convertible at
any time at the option of their respective holders at a conversion rate of 1.4334 common shares per Series A Preferred Share, subject
to adjustment in certain circumstances. In addition, upon the satisfaction of certain conditions we, at our option, may redeem the
Series A Preferred Shares at a current conversion rate of 1.4334 common shares per Series A Preferred Share, subject to adjustment in
certain circumstances. At no time will the Series A Preferred Shares be redeemable for cash.
Series E Cumulative Redeemable Preferred Shares of Beneficial Interest
Holders of Series E Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 7.0% of the
liquidation preference of $25.00 per share, or $1.75 per Series E Preferred Share per annum. These dividends are cumulative and
payable quarterly in arrears. The Series E Preferred Shares are not convertible into, or exchangeable for, any other property or any
other security of the Company. We, at our option, may redeem Series E Preferred Shares at a redemption price of $25.00 per share,
plus any accrued and unpaid dividends through the date of redemption. The Series E Preferred Shares have no maturity date and will
remain outstanding indefinitely unless redeemed by us.
155
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. Shareholders’ Equity - continued
Series F Cumulative Redeemable Preferred Shares of Beneficial Interest
Holders of Series F Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 6.75% of the
liquidation preference of $25.00 per share, or $1.6875 per Series F Preferred Share per annum. These dividends are cumulative and
payable quarterly in arrears. The Series F Preferred Shares are not convertible into, or exchangeable for, any other property or any
other security of the Company. We, at our option, may redeem Series F Preferred Shares at a redemption price of $25.00 per share,
plus any accrued and unpaid dividends through the date of redemption. The Series F Preferred Shares have no maturity date and will
remain outstanding indefinitely unless redeemed by us.
Series G Cumulative Redeemable Preferred Shares of Beneficial Interest
Holders of Series G Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 6.625% of the
liquidation preference of $25.00 per share, or $1.656 per Series G Preferred Share per annum. These dividends are cumulative and
payable quarterly in arrears. The Series G Preferred Shares are not convertible into, or exchangeable for, any other property or any
other security of the Company. We, at our option, may redeem Series G Preferred Shares at a redemption price of $25.00 per share,
plus any accrued and unpaid dividends through the date of redemption. The Series G Preferred Shares have no maturity date and will
remain outstanding indefinitely unless redeemed by us.
Series H Cumulative Redeemable Preferred Shares of Beneficial Interest
Holders of Series H Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 6.75% of the
liquidation preference of $25.00 per share, or $1.6875 per Series H Preferred Share per annum. The dividends are cumulative and
payable quarterly in arrears. The Series H Preferred Shares are not convertible into, or exchangeable for, any other property or any
other security of the Company. We, at our option, may redeem Series H Preferred Shares at a redemption price of $25.00 per share,
plus any accrued and unpaid dividends through the date of redemption. The Series H Preferred Shares have no maturity date and will
remain outstanding indefinitely unless redeemed by us.
Series I Cumulative Redeemable Preferred Shares of Beneficial Interest
Holders of Series I Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 6.625% of the
liquidation preference of $25.00 per share, or $1.656 per Series I Preferred Share per annum. The dividends are cumulative and
payable quarterly in arrears. The Series I Preferred Shares are not convertible into, or exchangeable for, any other property or any
other security of the Company. We, at our option, may redeem Series I Preferred Shares at a redemption price of $25.00 per share,
plus any accrued and unpaid dividends through the date of redemption. The Series I Preferred Shares have no maturity date and will
remain outstanding indefinitely unless redeemed by us.
Accumulated Other Comprehensive Income
Accumulated other comprehensive income was $73,729,000 and $73,453,000 as of December 31, 2011 and 2010, respectively,
and primarily consists of (i) accumulated unrealized gains from the mark-to-market of marketable securities classified as available-for-
sale, (ii) our pro rata share of other comprehensive income of non-consolidated subsidiaries and (iii) changes in the value of our
interest rate swap.
156
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. Fair Value Measurements
ASC 820, Fair Value Measurement and Disclosures defines fair value and establishes a framework for measuring fair value. The
objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date (the exit price). ASC 820 establishes a fair value hierarchy
that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in
active markets that are accessible at the measurement date for assets or liabilities; Level 2 – observable prices that are based on inputs
not quoted in active markets, but corroborated by market data; and Level 3 – unobservable inputs that are used when little or no
market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.
In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value. Considerable
judgment is necessary to interpret Level 2 and 3 inputs in determining the fair value of our financial and non-financial assets and
liabilities. Accordingly, our fair value estimates, which are made at the end of each reporting period, may be different than the
amounts that may ultimately be realized upon sale or disposition of these assets.
Fair Value Measurements on a Recurring Basis
Financial assets and liabilities that are measured at fair value on a recurring basis in our consolidated financial statements consist
of (i) marketable securities, (ii) derivative positions in marketable equity securities, (iii) the assets of our deferred compensation plan,
which are primarily marketable equity securities and equity investments in limited partnerships, (iv) Real Estate Fund investments,
and (v) mandatorily redeemable instruments (Series G-1 through G-4 convertible preferred units and Series D-13 cumulative
redeemable preferred units). The tables below aggregate the fair values of these financial assets and liabilities by their levels in the
fair value hierarchy at December 31, 2011 and 2010, respectively.
(Amounts in thousands)
Marketable securities
Real Estate Fund investments (75% of which is attributable to
noncontrolling interests)
Deferred compensation plan assets (included in other assets)
Derivative positions in marketable equity securities
(included in other assets)
Total assets
Total
As of December 31, 2011
Level 2
Level 1
$
741,321 $
741,321 $
346,650
95,457
-
39,236
Level 3
-
346,650
56,221
- $
-
-
30,600
$ 1,214,028 $
-
780,557 $
30,600
30,600 $
-
402,871
Mandatorily redeemable instruments (included in other liabilities) $
54,865 $
54,865 $
- $
-
(Amounts in thousands)
Marketable securities
Real Estate Fund investments (75% of which is attributable to
noncontrolling interests)
Deferred compensation plan assets (included in other assets)
Derivative positions in marketable equity securities
(included in other assets)
Total assets
Total
As of December 31, 2010
Level 2
Level 1
Level 3
$
766,116 $
766,116 $
- $
-
144,423
91,549
-
43,699
-
-
144,423
47,850
17,616
$ 1,019,704 $
-
809,815 $
17,616
17,616 $
-
192,273
Mandatorily redeemable instruments (included in other liabilities) $
55,097 $
55,097 $
- $
-
The table below summarizes the changes in the fair value of the Level 3 assets above for the years ended December 31, 2011 and
2010.
(Amounts in thousands)
Beginning balance
Purchases
Sales
Realized and unrealized gains
Other, net
Ending balance
Real Estate Fund Investments
For The Year Ended December 31,
Deferred Compensation Plan Assets
For The Year Ended December 31,
2011
2010
2011
2010
$
$
144,423 $
248,803
(48,355)
17,386
(15,607)
346,650 $
157
- $
144,423
-
-
-
144,423 $
47,850 $
25,692
(18,801)
1,232
248
56,221 $
39,589
17,006
(12,320)
3,527
48
47,850
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. Fair Value Measurements - continued
Fair Value Measurements on a Nonrecurring Basis
Non-financial assets measured at fair value on a nonrecurring basis in our consolidated financial statements consist of real estate
assets and investments in partially owned entities that have been written-down to estimated fair value during 2011 and 2010. See Note
2 – Basis of Presentation and Significant Accounting Policies for details of impairment losses recognized during 2011 and 2010. The
fair values of these assets are determined using widely accepted valuation techniques, including (i) discounted cash flow analysis,
which considers, among other things, leasing assumptions, growth rates, discount rates and terminal capitalization rates, (ii) income
capitalization approach, which considers prevailing market capitalization rates, and (iii) comparable sales activity. Generally, we
consider multiple valuation techniques when measuring fair values but in certain circumstances, a single valuation technique may be
appropriate. The tables below aggregate the fair values of these assets by their levels in the fair value hierarchy.
(Amounts in thousands)
Real estate assets
Total
As of December 31, 2011
Level 2
Level 1
Level 3
$
62,033 $
- $
- $
62,033
(Amounts in thousands)
Real estate assets
Investments in partially owned entities
Total
$
381,889 $
11,413
As of December 31, 2010
Level 2
Level 1
- $
-
Level 3
- $
-
381,889
11,413
Financial Assets and Liabilities not Measured at Fair Value
Financial assets and liabilities that are not measured at fair value in our consolidated financial statements include mezzanine
loans receivable and debt. Estimates of the fair values of these instruments are based on our assessments of available market
information and valuation methodologies, including discounted cash flow analyses. The table below summarizes the carrying
amounts and fair values of these financial instruments as of December 31, 2011 and 2010.
(Amounts in thousands)
Mezzanine loans receivable
Debt:
Notes and mortgages payable
Senior unsecured notes
Exchangeable senior debentures
Convertible senior debentures
Revolving credit facility debt
$
$
As of December 31, 2011
Fair
Value
Carrying
Amount
As of December 31, 2010
Fair
Value
Carrying
Amount
133,948 $
128,581 $
202,412 $
197,581
8,558,275 $
1,357,661
497,898
10,168
138,000
8,685,619 $
1,426,406
509,982
10,220
138,000
8,255,101 $
1,082,928
491,000
186,413
874,000
8,446,791
1,119,512
554,355
191,510
874,000
$
10,562,002 $
10,770,227 $
10,889,442 $
11,186,168
158
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. Stock-based Compensation
Our Share Option Plan (the “Plan”), which was approved in May 2010, provides the Compensation Committee of the Board (the
“Committee”) the ability to grant certain of our employees and officers, incentive and non-qualified stock options, stock appreciation
rights, performance shares, restricted shares and other stock-based awards and Operating Partnership units, certain of which may
provide for dividends or dividend equivalents and voting rights prior to vesting. Awards may be granted up to a maximum of
6,000,000 shares, if all awards granted are Full Value Awards, as defined, and up to 12,000,000 shares, if all of the awards granted are
Not Full Value Awards, as defined. Full Value Awards are awards of securities, such as restricted shares, that, if all vesting
requirements are met, do not require the payment of an exercise price or strike price to acquire the securities. Not Full Value Awards
are awards of securities, such as options, that do require the payment of an exercise price or strike price. This means, for example, if
the Committee were to award only restricted shares, it could award up to 6,000,000 restricted shares. On the other hand, if the
Committee were to award only stock options, it could award options to purchase up to 12,000,000 shares (at the applicable exercise
price). The Committee may also issue any combination of awards under the Plan, with reductions in availability of future awards
made in accordance with the above limitations. As of December 31, 2011, we have approximately 5,582,000 shares available for
future grants under the Plan, if all awards granted are Full Value Awards, as defined.
In the years ended December 31, 2011, 2010 and 2009, we recognized an aggregate of $28,853,000, $34,614,000 and
$59,814,000, respectively, of stock-based compensation expense, which is included as a component of “general and administrative
expenses” on our consolidated statements of income. The year ended December 31, 2010 includes $2,800,000 of expense resulting
from accelerating the vesting of certain Operating Partnership units and 2006 out-performance plan units, which were scheduled to
fully vest in the first quarter of 2011, and the year ended December 31, 2009 includes $32,588,000 of expense, representing the write-
off of the unamortized portion of awards that were voluntarily surrendered by nine of our most senior executives in the first quarter of
2009.
Out-Performance Plans
In March 2008, the Committee approved a $75,000,000 out-performance plan (the “2008 OPP”). The fair value of the 2008 OPP
awards on the date of grant, as adjusted for estimated forfeitures, was approximately $21,600,000. Of this amount, $13,722,000 was
expensed in the first quarter of 2009 upon the voluntary surrender of these awards by our nine most senior executives, and the
remainder is being amortized into expense over a five-year vesting period beginning on the date of grant, using a graded vesting
attribution model.
In April 2006, the Committee approved a $100,000,000 out-performance plan (the “2006 OPP”). The fair value of the 2006 OPP
awards on the date of grant, as adjusted for estimated forfeitures, was approximately $46,141,000 and was amortized into expense
over the five-year vesting period beginning on the date of grant, using a graded vesting attribution model. In January 2007, the
maximum performance threshold under the 2006 OPP was achieved, concluding the performance period.
In the years ended December 31, 2011, 2010 and 2009, we recognized $740,000, $5,062,000 and $23,493,000, respectively, of
compensation expense related to these awards. Of the $23,493,000 of expense recognized in 2009, $13,722,000 related to the write-
off of the unamortized portion of 2008 OPP that was voluntarily surrendered by nine of our most senior executives. As of December
31, 2011, there was $510,000 of total unrecognized compensation costs related to these plans, which will be recognized in 2012.
Distributions paid on unvested OPP units are charged to “net income attributable to noncontrolling interests in the Operating
Partnership, including unit distributions” on our consolidated statements of income and amounted to $32,000, $815,000 and
$1,935,000 in 2011, 2010 and 2009, respectively.
159
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. Stock-based Compensation – continued
Stock Options
Stock options are granted at an exercise price equal to the average of the high and low market price of our common shares on the
NYSE on the date of grant, generally vest over four years and expire 10 years from the date of grant. Compensation expense related
to stock option awards is recognized on a straight-line basis over the vesting period. In the years ended December 31, 2011, 2010 and
2009, we recognized $8,794,000, $7,916,000 and $25,911,000, respectively, of compensation expense related to stock options that
vested during each year. Of the $25,911,000 of expense recognized in 2009, $18,866,000 related to the voluntary surrender of awards
in 2009. As of December 31, 2011, there was $20,398,000 of total unrecognized compensation cost related to unvested stock options,
which is expected to be recognized over a weighted-average period of 1.8 years.
Below is a summary of our stock option activity under the Plan for the year ended December 31, 2011.
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Shares
Outstanding at January 1, 2011
Granted
Exercised
Cancelled or expired
Outstanding at December 31, 2011
Options vested and expected to vest at
December 31, 2011
Options exercisable at December 31, 2011
5,488,880 $
534,168
(1,173,875)
(378,178)
4,470,995 $
56.89
91.70
47.14
81.02
61.56
5.5 $
87,889,000
4,439,486 $
2,395,763 $
61.38
57.20
5.5 $
87,651,000
3.4 $
56,181,000
The fair value of each option grant is estimated on the date of grant using an option-pricing model with the following weighted-
average assumptions for grants in the years ended December 31, 2011, 2010 and 2009.
Expected volatility
Expected life
Risk free interest rate
Expected dividend yield
2011
35.00 %
7.1 years
2.90 %
4.40 %
December 31,
2010
35.00 %
7.90 years
3.60 %
4.90 %
2009
28.00 %
7.00 years
2.30 %
4.60 %
The weighted average grant date fair value of options granted during the years ended December 31, 2011, 2010 and 2009 was
$21.42, $16.96 and $5.67, respectively. Cash received from option exercises for the years ended December 31, 2011, 2010 and 2009
was $23,736,000, $25,338,000 and $1,749,000, respectively. The total intrinsic value of options exercised during the years ended
December 31, 2011, 2010 and 2009 was $39,348,000, $60,923,000 and $62,139,000, respectively.
160
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. Stock-based Compensation - continued
Restricted Stock
Restricted stock awards are granted at the average of the high and low market price of our common shares on the NYSE on the
date of grant and generally vest over four years. Compensation expense related to restricted stock awards is recognized on a straight-
line basis over the vesting period. In the years ended December 31, 2011, 2010 and 2009, we recognized $1,814,000, $1,432,000 and
$2,063,000, respectively, of compensation expense related to restricted stock awards that vested during each year. As of December
31, 2011, there was $3,567,000 of total unrecognized compensation cost related to unvested restricted stock, which is expected to be
recognized over a weighted-average period of 1.9 years. Dividends paid on unvested restricted stock are charged directly to retained
earnings and amounted to $185,000, $115,000 and $161,000 for the years ended December 31, 2011, 2010 and 2009, respectively.
Below is a summary of our restricted stock activity under the Plan for the year ended December 31, 2011.
Unvested Shares
Unvested at January 1, 2011
Granted
Vested
Cancelled or expired
Unvested at December 31, 2011
Weighted-Average
Grant-Date
Fair Value
Shares
75,548 $
11,362
(24,384)
(1,298)
61,228
78.60
91.70
83.31
72.30
79.28
Restricted stock awards granted in 2011, 2010 and 2009 had a fair value of $1,042,000, $3,922,000 and $496,000, respectively.
The fair value of restricted stock that vested during the years ended December 31, 2011, 2010 and 2009 was $2,031,000, $2,186,000
and $3,272,000, respectively.
Restricted Operating Partnership Units (“OP Units”)
OP Units are granted at the average of the high and low market price of our common shares on the NYSE on the date of grant,
vest ratably over four years and are subject to a taxable book-up event, as defined. Compensation expense related to OP Units is
recognized ratably over the vesting period using a graded vesting attribution model. In the years ended December 31, 2011, 2010 and
2009, we recognized $17,505,000, $20,204,000 and $8,347,000, respectively, of compensation expense related to OP Units that vested
during each year. As of December 31, 2011, there was $18,903,000 of total remaining unrecognized compensation cost related to
unvested OP Units, which is expected to be recognized over a weighted-average period of 1.5 years. Distributions paid on unvested
OP Units are charged to “net income attributable to noncontrolling interests in the Operating Partnership, including unit distributions”
on our consolidated statements of income and amounted to $2,567,000, $2,285,000 and $1,583,000 in 2011, 2010 and 2009,
respectively.
Below is a summary of restricted OP unit activity under the Plan for the year ended December 31, 2011.
Unvested Units
Unvested at January 1, 2011
Granted
Vested
Cancelled or expired
Unvested at December 31, 2011
Weighted-Average
Grant-Date
Fair Value
Units
720,457 $
217,740
(175,462)
(63,076)
699,659
56.78
86.00
58.47
58.50
65.29
OP Units granted in 2011, 2010 and 2009 had a fair value of $18,727,000, $31,437,000 and $10,691,000, respectively. The fair
value of OP Units that vested during the years ended December 31, 2011, 2010 and 2009 was $10,260,000, $14,087,000 and
$4,020,000, respectively.
161
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. Fee and Other Income
The following table sets forth the details of our fee and other income:
(Amounts in thousands)
BMS cleaning fees
Management and leasing fees
Lease termination fees
Other income
2011
For the Year Ended December 31,
2010
2009
$
$
61,754
20,103
16,395
52,102
150,354
$
$
58,053
20,117
14,826
54,362
147,358
$
$
53,824
11,456
4,886
85,160 (1)
155,326
(1) In December 2009, an agreement to sell an 8.6 acre parcel of land in the Pentagon City area of Arlington, Virginia, was terminated and
we recognized $27,089 of income representing the buyer's non-refundable purchase deposit, which is included in other income.
Fee and other income above includes management fee income from Interstate Properties, a related party, of $787,000, $815,000,
and $782,000 for the years ended December 31, 2011, 2010, and 2009, respectively. The above table excludes fee income from
partially owned entities which is included in income from partially owned entities (see Note 5 – Investments in Partially Owned
Entities).
15. Interest and Other Investment Income (Loss), Net
The following table sets forth the details of our interest and other investment income (loss):
(Amounts in thousands)
Mezzanine loans loss reversal (accrual) and net gain on disposition
Dividends and interest on marketable securities
Interest on mezzanine loans
Income from the mark-to-market of J.C. Penney derivative position
Mark-to-market of investments in our deferred compensation plan (1)
Impairment losses on marketable equity securities
Other, net
For the Year Ended December 31,
2010
2011
$
$
82,744 $
29,587
14,023
12,984
1,658
-
7,830
148,826 $
53,100 $
25,772
10,319
130,153
8,049
-
7,922
235,315 $
2009
(190,738)
25,908
32,181
-
9,506
(3,361)
10,154
(116,350)
__________________________
(1) This income is entirely offset by the expense resulting from the mark-to-market of the deferred compensation plan liability, which is included in
"general and administrative" expense.
162
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. Income Per Share
The following table provides a reconciliation of both net income and the number of common shares used in the computation of (i)
basic income per common share - which utilizes the weighted average number of common shares outstanding without regard to
dilutive potential common shares, and (ii) diluted income per common share - which includes the weighted average common shares
and dilutive share equivalents. Dilutive share equivalents may include our Series A convertible preferred shares, employee stock
options, restricted stock and exchangeable senior debentures.
(Amounts in thousands, except per share amounts)
Numerator:
Year Ended December 31,
2010
2011
2009
Income from continuing operations, net of income attributable to noncontrolling interests
Income (loss) from discontinued operations, net of income attributable to noncontrolling
$
525,584 $
655,053
$
59,655
interests
Net income attributable to Vornado
Preferred share dividends
Discount on preferred share and unit redemptions
Net income attributable to common shareholders
Earnings allocated to unvested participating securities
Numerator for basic income per share
Impact of assumed conversions:
Convertible preferred share dividends
Numerator for diluted income per share
Denominator:
Denominator for basic income per share –
weighted average shares
Effect of dilutive securities (1):
Employee stock options and restricted share awards
Convertible preferred shares
Denominator for diluted income per share –
weighted average shares and assumed conversions
INCOME PER COMMON SHARE – BASIC:
Income from continuing operations, net
Income (loss) from discontinued operations, net
Net income per common share
INCOME PER COMMON SHARE – DILUTED:
Income from continuing operations, net
Income (loss) from discontinued operations, net
Net income per common share
136,718
662,302
(65,531)
5,000
601,771
(221)
601,550
(7,170)
647,883
(55,534)
4,382
596,731
(120)
596,611
46,514
106,169
(57,076)
-
49,093
(184)
48,909
$
124
601,674 $
160
596,771
$
-
48,909
184,308
182,340
171,595
1,658
55
1,748
71
1,908
-
186,021
184,159
173,503
$
$
$
$
2.52 $
0.74
3.26 $
2.50 $
0.73
3.23 $
3.31
(0.04)
3.27
3.28
(0.04)
3.24
$
$
$
$
0.01
0.27
0.28
0.01
0.27
0.28
(1)
The effect of dilutive securities in the years ended December 31, 2011, 2010 and 2009 excludes an aggregate of 18,896, 19,684 and 21,276
weighted average common share equivalents, respectively, as their effect was anti-dilutive.
163
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. Leases
As lessor:
We lease space to tenants under operating leases. Most of the leases provide for the payment of fixed base rentals payable
monthly in advance. Office building leases generally require the tenants to reimburse us for operating costs and real estate taxes above
their base year costs. Shopping center leases provide for pass-through to tenants the tenant’s share of real estate taxes, insurance and
maintenance. Shopping center leases also provide for the payment by the lessee of additional rent based on a percentage of the tenants’
sales. As of December 31, 2011, future base rental revenue under non-cancelable operating leases, excluding rents for leases with an
original term of less than one year and rents resulting from the exercise of renewal options, is as follows:
(Amounts in thousands)
Year Ending December 31:
2012
2013
2014
2015
2016
Thereafter
$
1,807,885
1,718,403
1,609,279
1,425,804
1,232,154
6,045,584
These amounts do not include percentage rentals based on tenants’ sales. These percentage rents approximated $8,482,000,
$7,912,000 and $8,394,000, for the years ended December 31, 2011, 2010 and 2009, respectively.
None of our tenants accounted for more than 10% of total revenues in any of the years ended December 31, 2011, 2010 and 2009.
Former Bradlees Locations
Pursuant to a Master Agreement and Guaranty, dated May 1, 1992, we are due $5,000,000 per annum of additional rent from Stop
& Shop which was allocated to certain Bradlees former locations. On December 31, 2002, prior to the expiration of the leases to
which the additional rent was allocated, we reallocated this rent to other former Bradlees leases also guaranteed by Stop & Shop. Stop
& Shop is contesting our right to reallocate and claims that we are no longer entitled to the additional rent. On November 7, 2011, the
Court determined that we have a continuing right to allocate the annual rent to unexpired leases covered by the Master Agreement and
Guaranty and directed entry of a judgment in our favor ordering Stop & Shop to pay us the unpaid annual rent (see Note 20 –
Commitments and Contingencies – Litigation). As of December 31, 2011, we have a $41,983,000 receivable from Stop and Shop.
164
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. Leases - continued
As lessee:
We are a tenant under operating leases for certain properties. These leases have terms that expire during the next thirty years.
Future minimum lease payments under operating leases at December 31, 2011 are as follows:
(Amounts in thousands)
Year Ending December 31:
2012
2013
2014
2015
2016
Thereafter
$
31,472
31,666
31,945
30,596
26,470
1,037,730
Rent expense was $37,177,000, $36,417,000 and $35,011,000 for the years ended December 31, 2011, 2010 and 2009,
respectively.
We are also a lessee under capital leases for real estate. Lease terms generally range from 5-20 years with renewal or purchase
options. Capitalized leases are recorded at the present value of future minimum lease payments or the fair market value of the
property. Capitalized leases are depreciated on a straight-line basis over the estimated life of the asset or life of the related lease,
whichever is shorter. Amortization expense on capital leases is included in “depreciation and amortization” on our consolidated
statements of income. As of December 31, 2011, future minimum lease payments under capital leases are as follows:
(Amounts in thousands)
Year Ending December 31:
2012
2013
2014
2015
2016
Thereafter
Total minimum obligations
Interest portion
Present value of net minimum payments
$
$
707
706
707
706
707
16,014
19,547
(12,876)
6,671
At December 31, 2011 and 2010, $6,671,000 and $6,714,000, respectively, representing the present value of net minimum
payments are included in “Other Liabilities” on our consolidated balance sheets. At December 31, 2011 and 2010, property leased
under capital leases had a total cost of $6,216,000 and $6,216,000, respectively, and accumulated depreciation of $2,184,000 and
$2,029,000, respectively.
165
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. Cleveland Medical Mart Development Project
In 2010, two of our wholly owned subsidiaries entered into agreements with Cuyahoga County, Ohio (the “County”) to develop
and operate the Cleveland Medical Mart and Convention Center (the “Facility”), a 1,000,000 square foot showroom, trade show and
conference center in Cleveland’s central business district. The County is funding the development of the Facility, using the proceeds
it received from the issuance of general obligation bonds and other sources, up to the development budget of $465,000,000 and
maintain effective control of the property. During the 17-year development and operating period, our subsidiaries will receive net
settled payments of approximately $10,000,000 per year, which are net of its $36,000,000 annual obligation to the County. Our
subsidiaries’ obligation has been pledged by the County to the bondholders, but is payable by our subsidiaries only to the extent that
they first receive at least an equal payment from the County. Our subsidiaries engaged a contractor to construct the Facility pursuant
to a guaranteed maximum price contract; although our subsidiaries are ultimately responsible for cost overruns, the contractor is
responsible for all costs incurred in excess of its contract and has provided a completion guaranty. Construction of the Facility is
expected to be completed in 2013. Upon completion, our subsidiaries are required to fund $11,500,000, primarily for tenant
improvements, and they are responsible for operating expenses and are entitled to the net operating income, if any, of the Facility.
The County may terminate the operating agreement five years from the completion of development and periodically thereafter, if our
subsidiaries fail to achieve certain performance thresholds.
We account for these agreements using criteria set forth in ASC 605-25, Multiple-Element Arrangements, as our subsidiaries are
providing development, marketing, leasing, and other property management related services over the 17-year term. We recognize
development fees using the percentage of completion method of accounting. In the year ended December 31, 2011, we recognized
$154,080,000 of revenue, which is offset by development costs expensed of $145,824,000.
19. Multiemployer Benefit Plans
Our subsidiaries make contributions to certain multiemployer defined benefit plans (“Multiemployer Pension Plans”) and health
plans (“Multiemployer Health Plans”) for our union represented employees, pursuant to the respective collective bargaining
agreements.
Multiemployer Pension Plans
Multiemployer Pension Plans differ from single-employer pension plans in that (i) contributions to multiemployer plans may
be used to provide benefits to employees of other participating employers and (ii) if other participating employers fail to make their
contributions, each of our participating subsidiaries may be required to bear its then pro-rata share of unfunded obligations. If a
participating subsidiary withdraws from a plan in which it participates, it may be subject to a withdrawal liability. As of December
31, 2011, our subsidiaries’ participation in these plans were not significant to our consolidated financial statements.
In the years ended December 31, 2011, 2010 and 2009, our subsidiaries contributed $10,168,000, $9,629,000 and $9,260,000,
respectively, towards Multiemployer Pension Plans, which is included as a component of “operating” expenses on our consolidated
statements of income. Our subsidiaries’ contributions did not represent more than 5% of total employer contributions in any of these
plans for the years ended December 31, 2011, 2010 and 2009.
Multiemployer Health Plans
Multiemployer Health Plans in which our subsidiaries participate provide health benefits to eligible active and retired employees.
In the years ended December 31, 2011, 2010 and 2009, our subsidiaries contributed $23,847,000, $21,664,000 and $20,949,000,
respectively, towards these plans, which is included as a component of “operating” expenses on our consolidated statements of
income.
166
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. Commitments and Contingencies
Insurance
We maintain general liability insurance with limits of $300,000,000 per occurrence and all risk property and rental value
insurance with limits of $2.0 billion per occurrence, including coverage for terrorist acts, with sub-limits for certain perils such as
floods. Our California properties have earthquake insurance with coverage of $180,000,000 per occurrence, subject to a deductible in
the amount of 5% of the value of the affected property, up to a $180,000,000 annual aggregate.
Penn Plaza Insurance Company, LLC (“PPIC”), our wholly owned consolidated subsidiary, acts as a re-insurer with respect to all
risk property and rental value insurance and a portion of our earthquake insurance coverage, and as a direct insurer for coverage for
acts of terrorism, including nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by Terrorism Risk Insurance
Program Reauthorization Act. Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance
companies and the Federal government with no exposure to PPIC. Coverage for NBCR losses is up to $2.0 billion per occurrence, for
which PPIC is responsible for a deductible of $3,200,000 and 15% of the balance of a covered loss and the Federal government is
responsible for the remaining 85% of a covered loss. We are ultimately responsible for any loss borne by PPIC.
We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism. However, we
cannot anticipate what coverage will be available on commercially reasonable terms in future policy years.
Our debt instruments, consisting of mortgage loans secured by our properties which are non-recourse to us, senior unsecured
notes, exchangeable senior debentures, convertible senior debentures and revolving credit agreements contain customary covenants
requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements,
we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. Further, if lenders insist on greater
coverage than we are able to obtain it could adversely affect our ability to finance our properties and expand our portfolio.
Other Commitments and Contingencies
Our mortgage loans are non-recourse to us. However, in certain cases we have provided guarantees or master leased tenant space.
These guarantees and master leases terminate either upon the satisfaction of specified circumstances or repayment of the underlying
loans. As of December 31, 2011, the aggregate dollar amount of these guarantees and master leases is approximately $283,625,000.
At December 31, 2011, $22,085,000 of letters of credit were outstanding under one of our revolving credit facilities. Our credit
facilities contain financial covenants that require us to maintain minimum interest coverage and maximum debt to market
capitalization ratios, and provide for higher interest rates in the event of a decline in our ratings below Baa3/BBB. Our credit facilities
also contain customary conditions precedent to borrowing, including representations and warranties, and also contain customary
events of default that could give rise to accelerated repayment, including such items as failure to pay interest or principal.
Each of our properties has been subjected to varying degrees of environmental assessment at various times. The environmental
assessments did not reveal any material environmental contamination. However, there can be no assurance that the identification of
new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites, or changes in
cleanup requirements would not result in significant costs to us.
We expect to fund additional capital to certain of our partially owned entities aggregating approximately $288,799,000.
167
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. Commitments and Contingencies – continued
Litigation
We are from time to time involved in legal actions arising in the ordinary course of business. In our opinion, after consultation
with legal counsel, the outcome of such matters, including the matter referred to below, is not expected to have a material adverse
effect on our financial position, results of operations or cash flows.
In 2003, Stop & Shop filed an action against us in the New York Supreme Court, claiming that we had no right to reallocate and
therefore continue to collect $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of
the expiration of the leases to which the annual rent was previously allocated. Stop & Shop asserted that an order of the Bankruptcy
Court for the Southern District of New York, as modified on appeal by the District Court, froze our right to reallocate and effectively
terminated our right to collect the annual rent from Stop & Shop. We asserted a counterclaim seeking a judgment for all the unpaid
annual rent accruing through the date of the judgment and a declaration that Stop & Shop will continue to be liable for the annual rent
as long as any of the leases subject to the Master Agreement and Guaranty remain in effect. After summary judgment motions by
both sides were denied, the parties conducted discovery. A trial was held in November 2010. On November 7, 2011, the Court
determined that we have a continuing right to allocate the annual rent to unexpired leases covered by the Master Agreement and
Guaranty, and directed entry of a judgment in our favor ordering Stop & Shop to pay us the unpaid annual rent accrued through
February 28, 2011 in the amount of $37,422,000, a portion of the annual rent due from March 1, 2011 through the date of judgment,
interest, and attorneys’ fees. On December 16, 2011, a money judgment based on the Court’s decision was entered in our favor in the
amount of $56,597,000 (including interest and costs). The amount for attorneys’ fees is being addressed in a proceeding before a
special referee. Stop & Shop has appealed the Court’s decision and the judgment and has posted a bond to secure payment of the
judgment. On January 12, 2012, we commenced a new action against Stop & Shop seeking recovery of $2,500,000 of annual rent not
included in the money judgment, plus additional annual rent as it accrues.
As of December 31, 2011, we have a $41,983,000 receivable from Stop and Shop, excluding amounts due to us for interest and
costs resulting from the Court’s judgment. In the fourth quarter of 2011, based on the Court’s decision, we recognized $23,521,000 of
income, representing the portion of the $41,983,000 receivable that was previously reserved. As a result of Stop & Shop’s appeal, we
believe, after consultation with counsel, that the maximum reasonably possible loss is up to the total amount of the receivable of
$41,983,000.
21. Related Party Transactions
Alexander’s
We own 32.4% of Alexander’s. Steven Roth, the Chairman of our Board, and Michael D. Fascitelli, our President and Chief
Executive Officer, are officers and directors of Alexander’s. We provide various services to Alexander’s in accordance with
management, development and leasing agreements. These agreements are described in Note 5 - Investments in Partially Owned
Entities.
Interstate Properties (“Interstate”)
Interstate is a general partnership in which Mr. Roth is the managing general partner. David Mandelbaum and Russell B.
Wight, Jr., Trustees of Vornado and Directors of Alexander’s, are Interstate’s two other partners. As of December 31, 2011, Interstate
and its partners beneficially owned an aggregate of approximately 6.3% of the common shares of beneficial interest of Vornado and
27.2% of Alexander’s common stock.
We manage and lease the real estate assets of Interstate pursuant to a management agreement for which we receive an annual fee
equal to 4% of annual base rent and percentage rent. The management agreement has a term of one year and is automatically
renewable unless terminated by either of the parties on 60 days’ notice at the end of the term. We believe, based upon comparable fees
charged by other real estate companies, that the management agreement terms are fair to us. We earned $787,000, $815,000, and
$782,000 of management fees under the agreement for the years ended December 31, 2011, 2010 and 2009.
168
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
21. Related Party Transactions - continued
Other
Upon maturity on December 23, 2011, Steven Roth, the Chairman of our Board of Trustees, repaid the Company his $13,122,500
outstanding loan. Pursuant to a credit agreement dated November 1999, Mr. Roth may draw up to $15,000,000 of loans from the
Company on a revolving basis. Each loan bears interest, payable quarterly, at the applicable Federal rate on the date the loan is made
and matures on the sixth anniversary of such loan. Loans are collateralized by assets with a value of not less than two times the
amount outstanding. On December 23, 2011, Mr. Roth borrowed $13,122,500 under this facility, which bears interest at 1.27% per
annum and matures on December 23, 2017.
22. Summary of Quarterly Results (Unaudited)
The following summary represents the results of operations for each quarter in 2011 and 2010:
(Amounts in thousands, except per share amounts)
2011
December 31
September 30
June 30
March 31
2010
December 31
September 30
June 30
March 31
Net Income
Attributable
to Common
Shareholders (1)
Revenues
Net Income Per
Common Share (2)
Basic
Diluted
$
$
741,815 $
727,343
719,624
726,883
702,836 $
687,125
674,192
676,528
69,508 $
41,135
91,913
399,215
243,414 $
95,192
57,840
200,285
0.38 $
0.22
0.50
2.17
1.33 $
0.52
0.32
1.10
0.37
0.22
0.49
2.12
1.31
0.52
0.31
1.09
_______________________________
(1) Fluctuations among quarters resulted primarily from non-cash impairment losses, mark-to-market of derivative instruments, net gains
on sale of real estate and from seasonality of business operations.
(2) The total for the year may differ from the sum of the quarters as a result of weighting.
169
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
23. Segment Information
The financial information summarized below is presented by reportable operating segment, consistent with how we review and
manage our businesses.
(Amounts in thousands)
For the Year Ended December 31, 2011
$
Total
2,157,938 $
41,431
New York Washington, DC
Office
Office
Retail
Merchandise
Mart
Toys
783,438 $
25,720
558,256 $
(721)
424,646 $
16,319
208,059 $
(2,680)
Property rentals
Straight-line rent adjustments
Amortization of acquired below-
market leases, net
Total rentals
Tenant expense reimbursements
Cleveland Medical Mart development
project
Fee and other income:
BMS cleaning fees
Management and leasing fees
Lease termination fees
Other
Total revenues
Operating expenses
Depreciation and amortization
General and administrative
Cleveland Medical Mart development
project
Tenant buy-outs, impairment losses and
other acquisition related costs
Total expenses
Operating income (loss)
Income applicable to Toys
Income (loss) from partially owned
entities
Income from Real Estate Fund
Interest and other investment
income (loss), net
Interest and debt expense
Net gain on disposition of wholly
owned and partially owned assets
Income (loss) before income taxes
Income tax expense
Income (loss) from continuing
operations
Income from discontinued operations
Net income
Less:
Net (income) loss attributable to
noncontrolling interests in
consolidated subsidiaries
Net (income) attributable to
noncontrolling interests in the
Operating Partnership, including
unit distributions
Net income (loss) attributable to
Vornado
Interest and debt expense(2)
Depreciation and amortization(2)
Income tax expense (benefit)(2)
EBITDA(1)
Balance Sheet Data:
Real estate at cost
Investments in partially owned entities
Total assets
See notes on page 173.
62,442
2,261,811
349,420
31,547
840,705
140,038
2,088
559,623
36,849
23,751
464,716
150,338
38
205,417
11,602
154,080
-
-
-
154,080
61,754
20,103
16,395
52,102
95,452
7,394
11,539
22,189
2,915,665
1,091,597
553,811
209,981
145,824
58,299
2,059,512
856,153
48,540
71,770
22,886
1,117,317
485,731
186,765
18,815
-
-
691,311
426,006
-
(12,559)
-
148,826
(544,015)
642
(138,336)
15,134
619,294
(24,827)
-
275,753
(2,084)
594,467
145,533
740,000
273,669
563
274,232
-
12,361
3,794
20,650
633,277
200,677
160,729
26,380
-
3,071
767
5,966
624,858
205,385
114,360
28,098
-
342
295
3,558
375,294
132,470
41,094
29,996
-
-
145,824
-
24,146
28,228
387,786
245,491
-
(6,381)
-
199
(120,724)
-
118,585
(2,927)
115,658
46,466
162,124
371,989
252,869
-
4,006
-
(29)
(91,895)
4,278
169,229
(34)
169,195
4,000
173,195
377,612
(2,318)
-
455
-
43
(36,873)
-
(38,693)
(2,237)
(40,930)
94,504
53,574
Other(3)
183,539
2,793
- $
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,018
191,350
10,593
-
(33,698)
(3,065)
-
(261)
164,919
67,334
50,863
106,692
-
-
-
-
48,540
5,925
230,814
(65,895)
-
-
-
-
-
-
48,540
-
48,540
-
48,540
86,249
22,886
147,971
(156,187)
10,856
45,880
(17,545)
28,335
-
28,335
(21,786)
(10,042)
-
237
(55,912)
-
-
-
-
-
-
(11,981)
-
(55,912)
662,302
797,920
777,421
4,812
2,242,455 $
264,190
150,627
201,122
2,204
618,143 $
$
162,124
134,270
181,560
173,432
96,644
117,716
53,574
40,916
46,725
48,540
157,135
134,967
3,123
481,077 $
34
387,826 $
2,237
(1,132)
143,452 $ 339,510 $
(39,558)
218,328
95,331
(1,654)
272,447
$ 17,627,011 $ 5,554,964 $
1,740,459
20,446,487
355,499
6,244,822
4,373,361 $ 4,828,536 $
113,536
4,150,140
13,264
4,438,198
963,811 $
3,589
1,226,084
- $ 1,906,339
747,762
3,880,434
506,809
506,809
170
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
23. Segment Information – continued
(Amounts in thousands)
For the Year Ended December 31, 2010
$
Total
2,099,158 $
73,007
New York Washington, DC
Office
Office
Retail
Merchandise
Mart
Toys
773,996 $
34,197
566,041 $
5,849
390,068 $
28,604
199,323 $
382
Property rentals
Straight-line rent adjustments
Amortization of acquired below-
market leases, net
Total rentals
Tenant expense reimbursements
Fee and other income:
BMS cleaning fees
Management and leasing fees
Lease termination fees
Other
Total revenues
Operating expenses
Depreciation and amortization
General and administrative
Tenant buy-outs, impairment losses and
other acquisition related costs
Total expenses
Operating income (loss)
Income applicable to Toys
Income (loss) from partially owned
entities
(Loss) from Real Estate Fund
Interest and other investment
income, net
Interest and debt expense
Net gain (loss) on extinguishment
of debt
Net gain on disposition of wholly
owned and partially owned assets
Income (loss) before income taxes
Income tax expense
Income (loss) from continuing
operations
(Loss) income from discontinued
operations
Net income (loss)
Less:
Net (income) loss attributable to
noncontrolling interests in
consolidated subsidiaries
Net (income) attributable to
noncontrolling interests in the
Operating Partnership, including
unit distributions
Net income (loss) attributable to
Vornado
Interest and debt expense(2)
Depreciation and amortization(2)
Income tax (benefit) expense (2)
EBITDA(1)
Balance Sheet Data:
Real estate at cost
Investments in partially owned entities
Total assets
See notes on page 173.
65,542
2,237,707
355,616
58,053
20,117
14,826
54,362
2,740,681
1,082,844
522,022
213,949
129,458
1,948,273
792,408
71,624
22,438
(303)
36,164
844,357
137,412
88,664
6,192
4,270
22,283
1,103,178
469,495
176,534
18,578
2,326
574,216
51,963
21,470
440,142
144,224
-
15,934
1,148
21,427
664,688
213,935
142,720
25,464
-
1,029
7,641
3,674
596,710
220,090
108,156
29,610
(75)
199,630
11,059
-
156
467
3,838
215,150
114,161
40,130
26,720
-
-
72,500
20,000
664,607
438,571
-
(6,354)
-
382,119
282,569
-
(564)
-
430,356
166,354
-
9,401
-
201,011
14,139
-
(179)
-
235,315
(560,052)
608
(132,279)
157
(130,540)
180
(85,063)
47
(37,932)
94,789
-
-
105,571
-
Other(3)
169,730
3,975
- $
-
-
-
-
-
-
-
-
-
-
-
-
5,657
179,362
10,958
(30,611)
(3,194)
1,300
3,140
160,955
65,163
54,482
113,577
-
-
-
71,624
36,958
270,180
(109,225)
-
-
-
-
-
-
20,134
(303)
234,323
(174,238)
(10,782)
25,925
(14,166)
(18,283)
81,432
737,651
(22,476)
-
300,546
(2,167)
54,742
206,364
(1,816)
-
196,443
(37)
765
(23,160)
(173)
-
71,624
-
715,175
298,379
204,548
196,406
(23,333)
71,624
(32,449)
(7,144)
708,031
168
298,547
(4,481)
200,067
2,453
198,859
(5,284)
(28,617)
-
71,624
-
(32,449)
(4,920)
(9,559)
-
(778)
(55,228)
-
-
-
647,883
828,082
729,426
(23,036)
2,182,355 $
288,988
126,209
170,505
2,167
587,869 $
$
200,067
136,174
159,283
198,081
92,653
114,335
2,027
497,551 $
37
405,106 $
-
-
-
5,417
-
(55,228)
(28,617)
61,379
51,064
71,624
177,272
131,284
(45,418)
84,058 $ 334,762 $
232
(82,260)
234,395
102,955
17,919
273,009
$ 17,387,701 $ 5,505,010 $
1,375,006
20,517,471
97,743
5,743,781
4,237,438 $ 4,782,697 $
149,295
3,872,209
11,831
4,284,871
970,417 $
4,183
1,435,714
- $ 1,892,139
664,620
4,733,562
447,334
447,334
171
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
23. Segment Information – continued
(Amounts in thousands)
For the Year Ended December 31, 2009
$
Total
1,989,169 $
89,405
New York Washington, DC
Office
Office
Retail
Merchandise
Mart
Toys
757,372 $
36,832
526,683 $
22,683
354,397 $
26,943
191,485 $
2,478
Other(3)
159,232
469
- $
-
Property rentals
Straight-line rent adjustments
Amortization of acquired below-
market leases, net
Total rentals
Tenant expense reimbursements
Fee and other income:
BMS cleaning fees
Management and leasing fees
Lease termination fees
Other
Total revenues
Operating expenses
Depreciation and amortization
General and administrative
Tenant buy-outs, impairment losses and
other acquisition related costs
Total expenses
Operating income (loss)
Income applicable to Toys
(Loss) income from partially owned
entities
Interest and other investment (loss)
income, net
Interest and debt expense
Net (loss) gain on extinguishment
of debt
Net gain on disposition of wholly
owned and partially owned assets
Income (loss) before income taxes
Income tax expense
Income (loss) from continuing
operations
Income (loss) from discontinued operations
Net income (loss)
Less:
Net loss (income) attributable to
noncontrolling interests in
consolidated subsidiaries
Net (income) attributable to
noncontrolling interests in the
Operating Partnership, including
unit distributions
70,401
2,148,975
351,290
53,824
11,456
4,886
85,160
2,655,591
1,050,545
519,534
230,584
73,763
1,874,426
781,165
92,300
39,474
833,678
136,368
75,549
4,211
1,840
18,868
1,070,514
451,977
173,433
22,662
-
648,072
422,442
-
3,452
552,818
60,620
-
8,183
2,224
47,745
671,590
220,333
142,415
26,205
24,875
413,828
257,762
-
22,095
403,435
132,385
-
1,731
464
2,565
540,580
200,457
99,217
30,339
9,589
339,602
200,978
-
89
194,052
12,079
-
88
219
7,528
213,966
113,078
41,587
30,749
-
185,414
28,552
-
(19,910)
5,817
4,850
4,728
151
(116,350)
(617,768)
876
(133,647)
786
(128,039)
69
(88,844)
95
(38,009)
(25,915)
5,641
99,163
(20,642)
78,521
49,929
128,450
-
-
769
-
-
295,488
(1,332)
294,156
945
295,101
-
135,359
(1,482)
133,877
52,308
186,185
-
117,700
(319)
117,381
(3,430)
113,951
-
(9,211)
(2,140)
(11,351)
106
(11,245)
-
92,300
-
92,300
-
92,300
-
-
-
-
-
-
-
-
-
-
-
-
-
-
92,300
-
-
-
-
5,291
164,992
9,838
(21,725)
(2,757)
139
8,454
158,941
64,700
62,882
120,629
39,299
287,510
(128,569)
-
(35,456)
(118,176)
(229,229)
(26,684)
5,641
(532,473)
(15,369)
(547,842)
-
(547,842)
2,839
(9,098)
-
915
(25,120)
-
-
-
-
-
-
11,022
-
(25,120)
Net income (loss) attributable to
Vornado
Interest and debt expense(2)
Depreciation and amortization(2)
Income tax expense (benefit)(2)
EBITDA(1)
Balance Sheet Data:
Real estate at cost
Investments in partially owned entities
Total assets
See notes on the following page.
106,169
826,827
728,815
10,193
1,672,004 $
286,003
126,968
168,517
1,332
582,820 $
$
186,185
132,610
152,747
1,590
473,132 $
114,866
95,990
105,903
319
317,078 $
(11,245)
52,862
56,702
2,208
(561,940)
92,300
291,007
127,390
112,719
132,227
17,929
(13,185)
100,527 $ 338,732 $ (140,285)
$ 17,293,970 $ 5,421,640 $
1,209,285
20,185,472
128,961
5,538,362
4,593,749 $ 4,517,625 $
119,182
4,138,752
22,955
3,511,987
992,290 $
6,520
1,455,000
- $ 1,768,666
522,214
5,131,918
409,453
409,453
172
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
23. Segment Information - continued
Notes to preceding tabular information:
(1)
(2)
(3)
EBITDA represents "Earnings Before Interest, Taxes, Depreciation and Amortization." We consider EBITDA a supplemental
measure for making decisions and assessing the unlevered performance of our segments as it relates to the total return on assets as
opposed to the levered return on equity. As properties are bought and sold based on a multiple of EBITDA, we utilize this measure
to make investment decisions as well as to compare the performance of our assets to that of our peers. EBITDA should not be
considered a substitute for net income. EBITDA may not be comparable to similarly titled measures employed by other companies.
Interest and debt expense, depreciation and amortization and income tax expense in the reconciliation of net income (loss) to
EBITDA includes our share of these items from partially owned entities.
The tables below provide information about EBITDA from certain investments that are included in the "other" column of the
preceding EBITDA by segment reconciliations. The totals for each of the columns below agree to the total EBITDA for the "other"
column in the preceding EBITDA by segment reconciliations.
(Amounts in thousands)
Our share of Real Estate Fund:
Income before net realized/unrealized gains
$
Net unrealized gains
Net realized gains
Carried interest accrual
Total
Alexander's
LNR (acquired in July 2010)
Lexington (1)
555 California Street
Hotel Pennsylvania
Other investments
Corporate general and administrative expenses (2)
Investment income and other, net (2)
Mezzanine loans loss reversals (accrual) and net gain on disposition
Income from the mark-to-market of J.C. Penney derivative position
Net gain from Suffolk Downs' sale of a partial interest
Net gain on sale of condominiums
Acquisition costs
Real Estate Fund placement fees
Net loss on extinguishment of debt
Non-cash asset write-downs:
Investment in Lexington
Marketable equity securities
Real estate - primarily development projects:
Wholly owned entities
Partially owned entities
Write-off of unamortized costs from the voluntary surrender of equity awards
Net income attributable to noncontrolling interests in the Operating Partnership,
including unit distributions
For the Year Ended December 31,
2010
2011
2009
4,205 $
2,999
1,348
736
9,288
61,080
47,614
44,539
44,724
30,135
33,529
270,909
(85,922)
52,405
82,744
12,984
12,525
5,884
(5,925)
(3,451)
-
503 $
-
-
-
503
57,425
6,116
55,304
46,782
23,763
30,463
220,356
(90,343)
65,499
53,100
130,153
-
3,149
(6,945)
(5,937)
(10,782)
-
-
-
-
-
(13,794)
-
(30,013)
-
-
-
-
-
-
-
81,703
-
50,024
44,757
15,108
11,070
202,662
(79,843)
78,593
(190,738)
-
-
648
-
-
(26,684)
(19,121)
(3,361)
(39,299)
(17,820)
(20,202)
(55,912)
272,447 $
(55,228)
273,009 $
(25,120)
(140,285)
$
(1)
(2)
Includes net gains of $9,760 and $13,710 in 2011 and 2010, respectively, resulting from Lexington's stock issuances.
The amounts in these captions (for this table only) exclude the mark-to-market of our deferred compensation plan assets and offsetting
liability.
173
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures: Our management, with the participation of our Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15 (e) under the
Securities Exchange Act of 1934, as amended) as of the end of the period covered by this annual report on Form 10-K. Based on such
evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure
controls and procedures are effective.
Internal Control Over Financial Reporting: There have not been any changes in our internal control over financial reporting (as
defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended) during the fourth quarter of the fiscal year to
which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Vornado Realty Trust, together with its consolidated subsidiaries (the “Company”), is responsible for establishing
and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed
under the supervision of our principal executive and principal financial officers to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with
accounting principles generally accepted in the United States of America.
As of December 31, 2011, management conducted an assessment of the effectiveness of our internal control over financial
reporting based on the framework established in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, management has determined that our internal control over
financial reporting as of December 31, 2011 was effective.
Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in
the United States, and that receipts and expenditures are being made only in accordance with authorizations of management and our
trustees; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of
our assets that could have a material effect on our financial statements.
The effectiveness of our internal control over financial reporting as of December 31, 2011 has been audited by Deloitte & Touche
LLP, an independent registered public accounting firm, as stated in their report appearing on page 175, which expresses an unqualified
opinion on the effectiveness of our internal control over financial reporting as of December 31, 2011.
174
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and Board of Trustees
Vornado Realty Trust
New York, New York
We have audited the internal control over financial reporting of Vornado Realty Trust, together with its consolidated subsidiaries (the
“Company”) as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining
effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to
express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal
executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of trustees,
management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management
and trustees of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.
Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to
the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2011, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated financial statements and financial statement schedules as of and for the year ended December 31, 2011 of the Company
and our report dated February 27, 2012 expressed an unqualified opinion on those financial statements and financial statement
schedules and included an explanatory paragraph relating to a change in method of presenting comprehensive income.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
February 27, 2012
175
ITEM 9B.
OTHER INFORMATION
None.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information relating to trustees of the Registrant, including its audit committee and audit committee financial expert, will be
contained in a definitive Proxy Statement involving the election of trustees under the caption “Election of Trustees” which the
Registrant will file with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of
1934 not later than 120 days after December 31, 2011, and such information is incorporated herein by reference. Also incorporated
herein by reference is the information under the caption “16(a) Beneficial Ownership Reporting Compliance” of the Proxy Statement.
The following is a list of the names, ages, principal occupations and positions with Vornado of the executive officers of Vornado
and the positions held by such officers during the past five years. All executive officers of Vornado have terms of office that run until
the next succeeding meeting of the Board of Trustees of Vornado following the Annual Meeting of Shareholders unless they are
removed sooner by the Board.
Name
Steven Roth
Age
70
Michael D. Fascitelli
55
PRINCIPAL OCCUPATION, POSITION AND OFFICE
(Current and during past five years with Vornado unless otherwise stated)
Chairman of the Board; Chief Executive Officer from May 1989 to May 2009; Managing General
Partner of Interstate Properties, an owner of shopping centers and an investor in securities and
partnerships; Chief Executive Officer of Alexander’s, Inc. since March 1995, a Director since 1989,
and Chairman since May 2004.
Chief Executive Officer since May 2009; President and a Trustee since December 1996; President
of Alexander’s Inc. since August 2000 and Director since December 1996; Partner at
Goldman, Sachs & Co. in charge of its real estate practice from December 1992 to December 1996;
and Vice President at Goldman, Sachs & Co., prior to December 1992.
Mark Falanga
53
President of the Merchandise Mart Division since July 2011; Senior Vice President of the Merchandise
Mart Division from August 2005 to July 2011; Vice President of the Merchandise Mart Division and
its predecessor since January 1994.
Michael J. Franco
43
Executive Vice President - Co-Head of Acquisitions and Capital Markets since November 2010;
Managing Director (2003-2010) and Executive Director (2001-2003) of the Real Estate Investing
Group of Morgan Stanley.
David R. Greenbaum
60
President of the New York Office Division since April 1997 (date of our acquisition); President
of Mendik Realty (the predecessor to the New York Office division) from 1990 until April 1997.
Joseph Macnow
66
Executive Vice President - Finance and Administration since January 1998 and Chief Financial Officer
since March 2001; Vice President and Chief Financial Officer of the Company from 1985 to January
1998; Executive Vice President and Chief Financial Officer of Alexander's Inc. since August 1995.
Mitchell N. Schear
53
President of Vornado/Charles E. Smith L.P. (our Washington, DC Office division) since April 2003;
President of the Kaempfer Company from 1998 to April 2003 (date acquired by us).
Wendy Silverstein
51
Executive Vice President - Co-Head of Acquisitions and Capital Markets since November 2010;
Executive Vice President of Capital Markets since 1998; Senior Credit Officer of Citicorp Real Estate
and Citibank, N.A. from 1986 to 1998.
The Registrant has adopted a Code of Business Conduct and Ethics that applies to, among others, Michael Fascitelli, its principal
executive officer, and Joseph Macnow, its principal financial and accounting officer. This Code is available on our website at
www.vno.com.
176
ITEM 11.
EXECUTIVE COMPENSATION
Information relating to executive officer and director compensation will be contained in the Proxy Statement referred to above in
Item 10, “Directors, Executive Officers and Corporate Governance,” under the caption “Executive Compensation” and such
information is incorporated herein by reference.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Information relating to security ownership of certain beneficial owners and management will be contained in the Proxy Statement
referred to in Item 10, “Directors, Executive Officers and Corporate Governance,” under the caption “Principal Security Holders” and
such information is incorporated herein by reference.
Equity compensation plan information
The following table provides information as of December 31, 2011 regarding our equity compensation plans.
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of securities remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
the second column)
5,580,481 (1)
$
-
5,580,481
$
61.56
-
61.56
5,582,014 (2)
-
5,582,014
Plan Category
Equity compensation plans approved
by security holders
Equity compensation awards not
approved by security holders
Total
___________________________
(1)
Includes an aggregate of 1,109,486 shares/units, comprised of (i) 61,228 restricted common shares, (ii) 939,487 restricted Operating Partnership units and (iii)
108,771 Out-Performance Plan units, which do not have an exercise price.
(2)
Based on awards being granted as "Full Value Awards," as defined. If we were to grant "Not Full Value Awards," as defined, the number of securities available
for future grants would be 11,164,028.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information relating to certain relationships and related transactions will be contained in the Proxy Statement referred to in Item
10, “Directors, Executive Officers and Corporate Governance,” under the caption “Certain Relationships and Related Transactions”
and such information is incorporated herein by reference.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
Information relating to Principal Accounting fees and services will be contained in the Proxy Statement referred to in Item 10,
“Directors, Executive Officers and Corporate Governance,” under the caption “Ratification of Selection of Independent Auditors” and
such information is incorporated herein by reference.
177
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
PART IV
1. The consolidated financial statements are set forth in Item 8 of this Annual Report on Form 10-K.
The following financial statement schedules should be read in conjunction with the financial statements included in Item 8 of this
Annual Report on Form 10-K.
II--Valuation and Qualifying Accounts--years ended December 31, 2011, 2010 and 2009
III--Real Estate and Accumulated Depreciation as of December 31, 2011
Pages in this
Annual Report
on Form 10-K
180
181
Schedules other than those listed above are omitted because they are not applicable or the information required is included in the
consolidated financial statements or the notes thereto.
The following exhibits listed on the Exhibit Index, which is incorporated herein by reference, are filed with this Annual Report on
Form 10-K.
Exhibit No.
12
21
23
31.1
31.2
32.1
32.2
10.45
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
Computation of Ratios
Subsidiaries of Registrant
Consent of Independent Registered Public Accounting Firm
Rule 13a-14 (a) Certification of Chief Executive Officer
Rule 13a-14 (a) Certification of Chief Financial Officer
Section 1350 Certification of the Chief Executive Officer
Section 1350 Certification of the Chief Financial Officer
Promissory Note from Steven Roth to Vornado Realty Trust, dated December 23, 2011
XBRL Instance Document
XBRL Taxonomy Extension Schema
XBRL Taxonomy Extension Calculation Linkbase
XBRL Taxonomy Extension Definition Linkbase
XBRL Taxonomy Extension Label Linkbase
XBRL Taxonomy Extension Presentation Linkbase
178
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SIGNATURES
VORNADO REALTY TRUST
(Registrant)
Date: February 27, 2012
By:
/s/ Joseph Macnow
Joseph Macnow, Executive Vice President -
Finance and Administration and
Chief Financial Officer (duly authorized officer
and principal financial and accounting officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated:
Signature
By: /s/Steven Roth
(Steven Roth)
Title
Date
Chairman of the Board of Trustees
February 27, 2012
By: /s/Michael D. Fascitelli
(Michael D. Fascitelli)
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/Candace L. Beinecke
Trustee
(Candace L. Beinecke)
By: /s/Anthony W. Deering
Trustee
(Anthony W. Deering)
By: /s/Robert P. Kogod
Trustee
(Robert P. Kogod)
By: /s/Michael Lynne
Trustee
(Michael Lynne)
By: /s/David Mandelbaum
Trustee
(David Mandelbaum)
By: /s/Ronald G. Targan
Trustee
(Ronald G. Targan)
By: /s/Daniel R. Tisch
Trustee
(Daniel R. Tisch)
By: /s/Richard R. West
Trustee
(Richard R. West)
By: /s/Russell B. Wight
Trustee
(Russell B. Wight, Jr.)
By: /s/Joseph Macnow
(Joseph Macnow)
Executive Vice President — Finance and
Administration and Chief Financial Officer
(Principal Financial and Accounting Officer)
179
February 27, 2012
February 27, 2012
February 27, 2012
February 27, 2012
February 27, 2012
February 27, 2012
February 27, 2012
February 27, 2012
February 27, 2012
February 27, 2012
February 27, 2012
VORNADO REALTY TRUST
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
December 31, 2011
(Amounts in Thousands)
Column A
Column B
Column D
Column E
Column C
Additions
Charged
Against
Balance at
Beginning
of Year
Uncollectible
Accounts
Operations Written-off
Balance
at End
of Year
Description
Year Ended December 31, 2011:
Allowance for doubtful accounts
Year Ended December 31, 2010:
Allowance for doubtful accounts
Year Ended December 31, 2009:
Allowance for doubtful accounts
$
143,511
$
241,709
$
84,818
$
$
$
(54,700)
(23,063)
216,784
$
$
$
(41,524)
$
47,287
(75,135)
$
143,511
(59,893)
$
241,709
180
COLUMN A
COLUMN B
COLUMN C
COLUMN D
Initial cost to company (1)
COLUMN E
Gross amount at which
carried at close of period
COLUMN F COLUMN G
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)
Encumbrances
Land
Building
and
improvements
Costs
capitalized
subsequent
to acquisition
Buildings
and
improvements
Land
Accumulated
depreciation
and
Date of
Total (2)
amortization construction (3)
COLUMN H COLUMN I
Life on which
depreciation
in latest
income
statement
is computed
Date
acquired
Description
Office Buildings
New York
Manhattan
1290 Avenue of the Americas
350 Park Avenue
One Penn Plaza
100 West 33rd Street (Manhattan Mall)
Two Penn Plaza
770 Broadway
90 Park Avenue
888 Seventh Avenue
640 Fifth Avenue
Eleven Penn Plaza
1740 Broadway
909 Third Avenue
150 East 58th Street
595 Madison Avenue
866 United Nations Plaza
20 Broad Street
40 Fulton Street
689 Fifth Avenue
330 West 34th Street
1540 Broadway Garage
Other
Total New York
$
413,111 $ 515,539 $
265,889
430,000
-
-
242,776
159,361
53,615
425,000
52,898
353,000
8,000
-
-
318,554
38,224
-
40,333
330,000
26,971
-
-
203,217
39,303
-
62,731
-
32,196
44,978
-
-
15,732
-
19,721
-
-
-
4,086
-
-
-
2,677,221 1,418,014
923,653 $
363,381
412,169
247,970
164,903
95,686
175,890
117,269
25,992
85,259
102,890
120,723
80,216
62,888
37,534
28,760
26,388
13,446
8,599
8,914
5,548
3,108,078
75,193 $ 515,539 $
265,889
27,457
-
162,098
242,776
5,288
52,689
78,476
52,898
73,968
8,000
34,531
-
94,096
38,224
112,598
40,333
49,183
26,971
36,896
-
55,860
39,303
28,228
62,731
17,444
32,196
8,335
-
26,924
15,732
12,266
19,721
10,938
-
6,936
4,086
-
36,106
67,113
983,828 1,453,194
998,846 $ 1,514,385 $
656,727
390,838
574,267
574,267
496,034
253,258
296,994
244,305
222,552
169,654
218,421
210,421
211,365
211,365
176,814
138,590
174,775
134,442
166,757
139,786
176,583
176,583
147,747
108,444
143,063
80,332
78,065
45,869
55,684
55,684
54,386
38,654
44,105
24,384
15,535
15,535
13,000
8,914
72,661
36,555
5,509,920
4,056,726
127,938
49,264
194,075
31,141
101,246
58,810
77,221
75,888
51,821
50,168
47,179
49,222
38,427
23,464
17,376
16,914
12,548
10,476
4,700
1,235
4,794
1,043,907
1963
1960
1972
1911
1968
1907
1964
1980
1950
1923
1950
1969
1969
1968
1966
1956
1987
1925
1925
1990
2007
2006
1998
2007
1997
1998
1997
1998
1997
1997
1997
1999
1998
1999
1997
1998
1998
1998
1998
2006
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
Washington, DC
2011-2451 Crystal Drive
2001 Jefferson Davis Highway,
2100/2200 Crystal Drive, 223 23rd
Street, 2221 South Clark Street, Crystal
City Shops at 2100, 220 20th Street
1550-1750 Crystal Drive/
241-251 18th Street
Riverhouse Apartments
Skyline Place (6 buildings)
1215, 1225 S. Clark Street/ 200, 201
12th Street S.
274,305
100,935
409,920
115,837
100,228
526,464
626,692
149,944
1984-1989
2002
(4)
75,037
57,213
131,206
186,549
57,070
317,898
374,968
68,079
1964-1969
121,067
259,546
442,500
64,817
118,421
41,986
218,330
125,078
221,869
58,625
57,582
27,343
64,652
138,696
41,862
277,120
162,385
249,336
341,772
301,081
291,198
85,657
19,248
67,946
1974-1980
1973-1984
2002
2002
2007
2002
90,191
47,594
177,373
27,015
47,465
204,517
251,982
59,451
1983-1987
2002
(4)
(4)
(4)
(4)
(4)
181
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)
COLUMN A
COLUMN B
COLUMN C
COLUMN D
Description
1800, 1851 and 1901 South Bell Street
1229-1231 25th Street (West End 25)
2101 L Street
2200 / 2300 Clarendon Blvd
Bowen Building - 875 15th Street, NW
1875 Connecticut Ave, NW
One Skyline Tower
Reston Executive
H Street - North 10-1D Land Parcel
409 3rd Street
1825 Connecticut Ave, NW
Warehouses
Commerce Executive
1235 S. Clark Street
Seven Skyline Place
1150 17th Street
Crystal City Hotel
1750 Pennsylvania Avenue
1730 M Street
Democracy Plaza One
1726 M Street
Crystal Drive Retail
1109 South Capitol Street
South Capitol
H Street
1399 New York Avenue, NW
Other
Total Washington, DC
Encumbrances
-
101,671
150,000
53,344
115,022
49,433
134,700
93,000
-
-
48,806
-
-
51,309
100,800
28,728
-
44,330
14,853
-
-
-
-
-
-
-
-
2,248,642
Initial cost to company (1)
Building
and
improvements
Land
37,551
67,049
32,815
-
30,077
36,303
12,266
15,424
104,473
10,719
33,090
106,946
13,401
15,826
10,292
23,359
8,000
20,020
10,095
-
9,450
-
11,541
4,009
1,763
33,481
-
1,078,916
118,806
5,039
51,642
105,475
98,962
82,004
75,343
85,722
55
69,658
61,316
1,326
58,705
53,894
58,351
24,876
47,191
30,032
17,541
33,628
22,062
20,465
178
6,273
641
67,363
51,767
2,532,091
COLUMN E
Gross amount at which
carried at close of period
COLUMN F COLUMN G
Buildings
and
improvements
Accumulated
depreciation
and
Date of
Total (2)
amortization construction (3)
Costs
capitalized
subsequent
to acquisition
Land
37,551
32,899
68,198
105,574
39,768
82,632
-
29,342
30,176
1,287
35,886
3,459
12,231
32,911
15,380
9,084
87,666
(11,356)
10,719
5,826
32,726
(5,595)
83,400
(22,901)
13,363
13,422
15,826
14,959
10,262
(6,499)
24,723
14,551
8,000
7,176
21,170
256
10,687
9,449
-
(1,366)
9,455
2,539
-
5,799
11,597
4
-
(2,753)
1,763
41
33,481
-
(42,015)
-
751,676 1,064,001
151,705
109,464
127,321
134,817
100,150
85,880
108,289
94,850
5,506
75,484
56,085
1,971
72,165
68,853
51,882
38,063
54,367
29,138
26,398
32,262
24,596
26,264
126
7,529
682
67,363
9,752
3,298,682
189,256
177,662
167,089
134,817
130,326
121,766
120,520
110,230
93,172
86,203
88,811
85,371
85,528
84,679
62,144
62,786
62,367
50,308
37,085
32,262
34,051
26,264
11,723
7,529
2,445
100,844
9,752
4,362,683
1968
1975
1988-1989
2004
1963
1988
1987-1989
1990
1956
1985-1989
1981
2001
1970
1968
1964
1963
1987
1964
2004
66,789
5,851
16,783
38,724
16,584
13,104
27,483
27,272
-
26,065
8,613
1,333
20,285
16,722
13,792
12,237
9,602
7,656
8,457
12,459
3,391
8,011
178
-
108
-
-
811,824
COLUMN H COLUMN I
Life on which
depreciation
in latest
income
statement
is computed
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
Date
acquired
2002
2007
2003
2002
2005
2007
2002
2002
2007
1998
2007
2007
2002
2002
2002
2002
2004
2002
2002
2002
2006
2004
2007
2005
2005
2011
New Jersey
Paramus
California
555 California Street
-
-
-
23,785
1,033
22,752
23,785
14,279
1967
1987
600,000
221,903
893,324
38,055
221,903
931,379
1,153,282
118,824 1922/1969/1970
2007
(4)
(4)
Total Office Buildings
5,525,863
2,718,833
6,533,493
1,797,344 2,740,131
8,309,539 11,049,670
1,988,834
182
COLUMN A
COLUMN B
COLUMN C
COLUMN D
Initial cost to company (1)
COLUMN E
Gross amount at which
carried at close of period
COLUMN F COLUMN G
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)
Building
and
improvements
Land
Costs
capitalized
subsequent
to acquisition
Buildings
and
improvements
Land
Accumulated
depreciation
and
Date of
Total (2)
amortization construction (3)
Encumbrances
COLUMN H COLUMN I
Life on which
depreciation
in latest
income
statement
is computed
Date
acquired
Description
Shopping Centers
California
Los Angeles (Beverly Connection)
San Jose
Walnut Creek (1149 S. Main St)
Pasadena
San Francisco (Geary Blvd)
Signal Hill
Walnut Creek (1556 Mount Diablo Blvd)
Redding
Merced
San Bernadino (1522 E. Highland Ave)
Corona
Vallejo
San Bernadino (648 W. 4th St)
Mojave
Barstow
Colton (1904 North Rancho Avenue)
Moreno Valley
Rialto
Desert Hot Springs
Yucaipa
Riverside (5571 Mission Blvd)
Total California
Connecticut
Waterbury
Newington
Total Connecticut
Florida
Tampa (Hyde Park Village)
Tampa (1702 North Dale Mabry)
Total Florida
100,000
112,476
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
212,476
72,996
42,836
2,699
-
11,857
9,652
5,909
2,900
1,725
1,651
-
-
1,597
-
856
1,239
639
434
197
663
209
158,059
14,501
11,657
26,158
667
2,421
3,088
19,876
-
19,876
8,000
3,651
11,651
131,510
104,262
19,930
18,337
4,444
2,940
-
2,857
1,907
1,810
3,073
2,945
1,119
2,250
1,367
954
1,156
1,173
1,355
426
704
304,519
4,504
1,200
5,704
23,293
2,388
25,681
21,592
329
-
747
27
1
1,057
483
215
-
-
-
-
-
-
-
-
-
-
-
-
24,451
72,996
42,836
2,699
-
11,857
9,652
5,908
2,900
1,725
1,651
-
-
1,597
-
856
1,239
639
434
197
663
209
158,058
153,102
104,591
19,930
19,084
4,471
2,941
1,058
3,340
2,122
1,810
3,073
2,945
1,119
2,250
1,367
954
1,156
1,173
1,355
426
704
328,971
226,098
147,427
22,629
19,084
16,328
12,593
6,966
6,240
3,847
3,461
3,073
2,945
2,716
2,250
2,223
2,193
1,795
1,607
1,552
1,089
913
487,029
4,852
951
5,803
667
2,421
3,088
9,356
2,151
11,507
10,023
4,572
14,595
12,494
2,134
14,628
8,000
3,650
11,650
35,787
4,523
40,310
43,787
8,173
51,960
18,335
3,584
3,066
2,361
693
386
-
420
368
336
570
384
208
417
254
177
214
217
251
79
131
32,451
5,669
732
6,401
5,823
569
6,392
2008
2008
1969
1965
2005
2010
2006
2007
2006
2006
2007
2006
2006
2004
2004
2006
2004
2004
2004
2004
2004
2004
2004
2004
2004
1969
1965
2005
2006
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
183
COLUMN A
COLUMN B
COLUMN C
COLUMN D
Initial cost to company (1)
COLUMN E
Gross amount at which
carried at close of period
COLUMN F COLUMN G
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)
Description
Illinois
Lansing
Iowa
Dubuque
Maryland
Rockville
Baltimore (Towson)
Annapolis
Wheaton
Glen Burnie
Total Maryland
Massachusetts
Dorchester
Springfield
Chicopee
Cambridge
Total Massachusetts
Michigan
Roseville
Battle Creek
Midland
Total Michigan
New Hampshire
Salem
New Jersey
Paramus (Bergen Town Center)
North Bergen (Tonnelle Ave)
Union (Springfield Avenue)
East Rutherford
East Hanover I and II
Garfield
Lodi (Washington Street)
Englewood
Bricktown
Totowa
Hazlet
Carlstadt
COLUMN H COLUMN I
Life on which
depreciation
in latest
income
statement
is computed
Date
acquired
Encumbrances
Land
Building
and
improvements
Costs
capitalized
subsequent
to acquisition
Buildings
and
improvements
Land
Accumulated
depreciation
and
Date of
Total (2)
amortization construction (3)
-
2,135
1,064
71
2,135
1,135
3,270
145
-
-
1,479
-
-
1,479
1,479
193
-
16,207
-
-
-
16,207
3,470
581
-
-
462
4,513
-
5,942
8,615
-
14,557
12,844
2,797
895
-
16,536
-
-
-
-
30
1,264
-
1,294
20,599
3,227
9,652
5,367
2,571
41,416
3,794
2,471
-
-
6,265
6,128
2,144
133
8,405
100
8,682
-
-
586
9,368
3,470
581
-
-
462
4,513
(3)
578
-
260
835
12,841
2,797
895
-
16,533
1,465
(2,443)
86
(892)
30
264
-
294
20,699
11,909
9,652
5,367
3,157
50,784
3,794
3,049
-
260
7,103
7,593
701
219
8,513
24,169
12,490
9,652
5,367
3,619
55,297
16,635
5,846
895
260
23,636
7,623
965
219
8,807
3,517
4,390
2,203
704
2,703
13,517
498
740
-
94
1,332
1,787
92
72
1,951
1968
1958
1993
1969
-
6,083
-
-
6,083
-
6,083
-
2006
2006
2005
1968
2005
2006
1958
2006
1966
1969
2005
2006
2006
2006
283,590
75,000
29,570
14,103
44,412
-
9,422
12,077
33,153
25,703
-
7,304
19,884
24,493
19,700
-
2,232
45
7,606
2,300
1,391
1,102
7,400
-
81,723
-
45,090
36,727
18,241
8,068
13,125
17,245
11,179
11,994
9,413
16,457
366,325
63,376
-
(1)
10,376
20,798
275
17
6,154
4,617
-
12
37,635
31,806
19,700
-
2,671
45
7,606
2,300
1,391
1,099
7,400
-
430,297
56,063
45,090
36,726
28,178
28,866
13,400
17,262
17,333
16,614
9,413
16,469
467,932
87,869
64,790
36,726
30,849
28,911
21,006
19,562
18,724
17,713
16,813
16,469
1957/2009
2009
2007
1962
2009
1968
1957/1999
42,648
4,324
5,166
3,177
13,166
2,513
2,351
1,978
10,383
11,445
1,078
1,720
2003
2006
2007
2007
1962/1998
1998
2004
2007
1968
1957
2007
2007
184
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
COLUMN A
COLUMN B
COLUMN C
COLUMN D
Initial cost to company (1)
COLUMN E
Gross amount at which
carried at close of period
COLUMN F COLUMN G
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)
Description
North Plainfield
East Brunswick II (339-341 Route 18 S.)
Manalapan
Marlton
Union (Route 22 and Morris Ave)
Hackensack
Wayne Towne Center
Watchung
South Plainfield
Eatontown
Cherry Hill
Dover
Lodi (Route 17 N.)
East Brunswick I (325-333 Route 18 S.)
Jersey City
Morris Plains
Middletown
Woodbridge
Delran
Lawnside
Kearny
Bordentown
Turnersville
North Bergen (Kennedy Blvd)
Montclair
Total New Jersey
Encumbrances
-
12,226
21,836
17,913
33,551
42,082
-
15,638
5,317
-
14,387
13,648
11,771
25,817
21,040
22,178
18,026
21,438
-
11,089
-
-
-
5,289
2,730
850,310
New York
Valley Stream (Green Acres Mall)
Bronx (Bruckner Blvd)
Hicksville (Broadway Mall)
Poughkeepsie
Huntington
Mt. Kisco
Bronx (1750-1780 Gun Hill Road)
Staten Island
Inwood
Queens (99-01 Queens Blvd)
West Babylon
Freeport (437 E. Sunrise Highway)
Dewitt
Buffalo (Amherst)
Oceanside
325,045
-
87,750
-
17,287
29,026
-
17,237
-
-
-
22,178
-
-
-
Building
and
improvements
Land
Costs
capitalized
subsequent
to acquisition
Buildings
and
improvements
Land
Accumulated
depreciation
and
Date of
Total (2)
amortization construction (3)
500
2,098
725
1,611
3,025
692
-
4,178
-
4,653
5,864
559
238
319
652
1,104
283
1,509
756
851
309
498
900
2,308
66
119,851
147,172
66,100
126,324
12,733
21,200
22,700
6,427
11,446
12,419
7,839
6,720
1,231
-
5,743
2,710
13,983
10,949
7,189
3,464
7,470
10,219
26,137
5,463
10,044
4,999
2,694
6,363
9,446
6,220
7,495
6,411
5,248
2,675
4,468
3,164
3,376
3,176
1,342
636
419
432,312
134,980
259,503
48,904
12,026
33,667
26,700
11,885
21,262
19,097
20,392
13,786
4,747
7,116
4,056
2,306
500
2,098
1,046
1,611
3,025
692
-
4,441
-
4,653
4,864
559
238
319
652
1,104
283
1,539
756
851
309
717
900
2,308
66
145,184
146,968
66,100
126,324
12,780
21,200
23,297
6,428
11,446
12,419
7,839
6,720
1,231
-
5,107
2,710
1,380
2,826
7,791
10,398
1,813
1,250
2,782
1,545
389
357
1,828
2,955
-
2,764
325
882
1,607
1,780
734
1,269
1,212
1,141
853
34
381
520,245
59,161
336
7,216
37,119
166
386
18,012
300
521
2,104
70
1,421
-
1,825
-
185
15,363
13,775
14,659
13,862
9,283
11,469
28,919
6,745
10,433
5,356
5,522
9,318
9,446
8,984
7,820
7,293
6,855
4,425
5,202
4,433
4,588
4,098
2,195
670
800
927,224
194,345
259,839
56,120
49,098
33,833
26,489
29,896
21,562
19,618
22,496
13,856
6,168
7,116
6,517
2,306
15,863
15,873
15,705
15,473
12,308
12,161
28,919
11,186
10,433
10,009
10,386
9,877
9,684
9,303
8,472
8,397
7,138
5,964
5,958
5,284
4,897
4,815
3,095
2,978
866
1,072,408
341,313
325,939
182,444
61,878
55,033
49,786
36,324
33,008
32,037
30,335
20,576
7,399
7,116
11,624
5,016
10,714
8,138
10,027
6,600
4,492
8,713
785
3,396
1,175
897
3,864
5,782
2,891
8,556
2,265
6,565
5,001
2,396
5,026
3,987
3,260
4,018
2,127
403
664
211,691
51,397
32,467
8,327
4,852
3,524
2,700
2,266
4,341
3,400
4,291
1,658
4,882
925
4,455
264
1955
1972
1971
1973
1962
1963
-
1994
1964
1964
1999
1957
1965
1961
1963
1959
1972
1969
1938
1958
1974
1993
1972
1956
2009
2009
1981
1968
COLUMN H COLUMN I
Life on which
depreciation
in latest
income
statement
is computed
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
Date
acquired
1989
1972
1971
1973
1962
1963
2010
1959
2007
2005
1964
1964
1975
1957
1965
1985
1963
1959
1972
1969
1959
1958
1974
1959
1972
1997
2007
2005
2005
2007
2007
2005
2004
2004
2004
2007
1981
2006
1968
2007
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
COLUMN A
COLUMN B
COLUMN C
COLUMN D
Initial cost to company (1)
COLUMN E
Gross amount at which
carried at close of period
COLUMN F COLUMN G
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)
Description
Albany (Menands)
Rochester (Henrietta)
Rochester
Freeport (240 West Sunrise Highway)
Commack
New Hyde Park
Manhattan
1540 Broadway
Manhattan Mall
828-850 Madison Avenue
4 Union Square South
478-482 Broadway
510 5th Avenue
40 East 66th Street
155 Spring Street
334 Canal Street
435 7th Avenue
692 Broadway
715 Lexington Avenue
677-679 Madison Avenue
431 7th Avenue
484-486 Broadway
1135 Third Avenue
148 Spring Street
150 Spring Street
488 8th Avenue
484 8th Avenue
825 7th Avenue
Total New York
Pennsylvania
Wilkes-Barre
Philadelphia
Allentown
Bensalem
Bethlehem
Wyomissing
York
Broomall
Encumbrances
-
-
4,549
-
-
-
-
72,639
80,000
75,000
-
31,732
-
-
-
51,353
-
-
-
-
-
-
-
-
-
-
-
813,796
20,475
-
31,106
15,439
5,800
-
5,402
11,089
Building
and
improvements
Land
Costs
capitalized
subsequent
to acquisition
Buildings
and
improvements
Land
Accumulated
depreciation
and
Date of
Total (2)
amortization construction (3)
460
-
2,172
-
-
-
105,914
88,595
107,937
24,079
20,000
34,602
13,616
13,700
1,693
19,893
6,053
-
13,070
16,700
10,000
7,844
3,200
3,200
10,650
3,856
1,483
959,481
6,053
933
187
2,727
827
-
409
850
2,091
2,647
-
-
43
4
214,208
113,473
28,261
55,220
13,375
18,728
34,635
30,544
6,507
19,091
22,908
26,903
9,640
2,751
6,688
7,844
8,112
5,822
1,767
762
697
1,253,148
26,646
23,650
15,580
6,698
5,200
2,646
2,568
2,171
2,356
1,205
-
260
236
-
18,061
73,376
10
620
27,574
10,516
121
2,153
-
37
2,586
-
361
-
4,079
-
112
137
(4,674)
-
33
267,796
371
6,244
330
1,858
347
2,393
1,811
786
460
-
2,172
-
-
-
105,914
88,595
107,937
24,079
20,000
34,602
13,616
13,700
1,693
19,893
6,053
-
13,070
16,700
10,000
7,844
3,200
3,200
6,859
3,856
1,483
955,495
6,053
933
187
2,727
839
-
409
850
186
4,447
3,852
-
260
279
4
4,907
3,852
2,172
260
279
4
232,269
186,849
28,271
55,840
40,949
29,244
34,756
32,697
6,507
19,128
25,494
26,903
10,001
2,751
10,767
7,844
8,224
5,959
884
762
730
1,524,930
338,183
275,444
136,208
79,919
60,949
63,846
48,372
46,397
8,200
39,021
31,547
26,903
23,071
19,451
20,767
15,688
11,424
9,159
7,743
4,618
2,213
2,480,425
27,017
29,894
15,910
8,556
5,535
5,039
4,379
2,957
33,070
30,827
16,097
11,283
6,374
5,039
4,788
3,807
3,395
3,512
-
84
4
4
16,679
26,120
4,711
10,732
3,370
687
5,177
3,881
-
4,511
3,895
4,484
1,378
327
853
2,745
737
547
82
284
261
228,209
2,738
9,130
11,995
3,049
5,483
2,492
3,713
2,829
1965
1971
1966
1970
2009
1965/2004
2009
2002
1923
2009
1977
1957
1972/1999
1966
1970
1966
COLUMN H COLUMN I
Life on which
depreciation
in latest
income
statement
is computed
(4)
(4)
(4)
(4)
(4)
(4)
Date
acquired
1965
1971
1966
2005
2006
1976
2006
2007
2005
1993
2007
2010
2005
2007
2011
1997
2005
2001
2006
2007
2007
1997
2008
2008
2007
1997
1997
2007
1994
1957
1972
1966
2005
1970
1966
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
COLUMN A
COLUMN B
COLUMN C
COLUMN D
Initial cost to company (1)
COLUMN E
Gross amount at which
carried at close of period
COLUMN F COLUMN G
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)
Description
Lancaster
Upper Moreland
Glenolden
Levittown
Springfield
Total Pennsylvania
South Carolina
Charleston
Tennessee
Antioch
Texas
Texarkana
Virginia
Springfield (Springfield Mall)
Norfolk
Total Virginia
Washington
Bellingham
Washington, DC
3040 M Street
Wisconsin
Fond Du Lac
Puerto Rico
Las Catalinas
Montehiedra
Total Puerto Rico
Other
Building
and
improvements
Land
Costs
capitalized
subsequent
to acquisition
Buildings
and
improvements
Land
Accumulated
depreciation
and
Date of
Total (2)
amortization construction (3)
3,140
683
850
183
-
16,842
63
1,868
1,820
1,008
-
89,918
543
900
826
364
123
16,896
3,140
683
850
183
-
16,854
606
2,768
2,646
1,372
123
106,802
3,746
3,451
3,496
1,555
123
123,656
412
2,661
1,869
1,370
-
47,741
1966
1974
1975
1964
Encumbrances
5,601
-
7,108
-
-
102,020
-
-
3,634
-
-
3,634
3,634
477
-
1,521
2,386
-
1,521
2,386
3,907
313
-
-
-
-
-
458
33
-
491
491
66
49,516
-
49,516
265,964
3,927
269,891
(42,815)
15
(42,800)
49,516
-
49,516
223,149
3,942
227,091
272,665
3,942
276,607
33,751
2,284
36,035
-
1,831
2,136
(1,670)
922
1,375
2,297
126
-
7,830
27,490
45
7,830
27,535
35,365
4,118
-
-
174
102
-
276
276
64
55,912
120,000
175,912
15,280
9,182
24,462
64,370
66,751
131,121
8,091
5,023
13,114
15,280
9,267
24,547
72,461
71,689
144,150
87,741
80,956
168,697
24,511
26,114
50,625
1996
1996
-
-
-
5,364
-
5,364
5,364
101
COLUMN H COLUMN I
Life on which
depreciation
in latest
income
statement
is computed
(4)
(4)
(4)
(4)
(4)
Date
acquired
1966
1974
1975
1964
2005
2006
2006
2006
2006
2005
2005
2006
2006
2002
1997
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
Total Retail Properties
2,231,312 1,384,693
2,607,201
833,389 1,404,223
3,421,060
4,825,283
641,948
187
COLUMN A
COLUMN B
COLUMN C
COLUMN D
Initial cost to company (1)
COLUMN E
Gross amount at which
carried at close of period
COLUMN F COLUMN G
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)
Encumbrances
Land
Building
and
improvements
Costs
capitalized
subsequent
to acquisition
Buildings
and
improvements
Land
Accumulated
depreciation
and
Date of
Total (2)
amortization construction (3)
COLUMN H COLUMN I
Life on which
depreciation
in latest
income
statement
is computed
Date
acquired
Description
Merchandise Mart Properties
Illinois
Merchandise Mart, Chicago
527 W. Kinzie, Chicago
Total Illinois
Washington, DC
Washington Design Center
New York
7 West 34th Street
MMPI Piers
Total New York
Massachusetts
Boston Design Center
California
L.A. Mart, Los Angeles
550,000
-
550,000
64,528
5,166
69,694
319,146
-
319,146
166,115
-
166,115
64,535
5,166
69,701
485,254
-
485,254
549,789
5,166
554,955
158,615
-
158,615
1930
1998
(4)
-
12,274
40,662
12,888
12,274
53,550
65,824
17,579
1919
1998
-
-
-
34,614
-
34,614
94,167
-
94,167
35,886
9,897
45,783
34,614
-
34,614
130,053
9,897
139,950
164,667
9,897
174,564
34,132
243
34,375
1901
2000
2008
67,350
-
93,915
(15,552)
-
78,363
78,363
16,411
1918
2005
-
10,141
43,422
17,217
10,141
60,639
70,780
17,135
1958
2000
Total Merchandise Mart
617,350
126,723
591,312
226,451
126,730
817,756
944,486
244,115
Warehouse/Industrial
New Jersey
East Hanover
Edison
Total Warehouse/Industrial
Other Properties
Hotel Pennsylvania
220 Central Park South
Wasserman
40 East 66th Residential
677-679 Madison
Atlantic City, NJ
Other
Total Other Properties
Leasehold Improvements
Equipment and Other
Total December 31, 2011
-
-
-
576
-
576
7,752
-
7,752
7,879
4,903
12,782
691
704
1,395
15,516
4,199
19,715
16,207
4,903
21,110
-
123,750
-
-
-
60,000
-
183,750
29,904
115,720
28,052
29,199
1,462
83,089
-
287,426
121,712
16,420
-
85,798
1,058
7
-
224,995
74,238
112,447
34,927
(77,583)
1,294
(3)
70
145,390
29,904
115,720
40,237
14,540
2,212
83,089
-
285,702
195,950
128,867
22,742
22,874
1,602
4
70
372,109
225,854
244,587
62,979
37,414
3,814
83,093
70
657,811
1972
1962
1919
13,755
4,179
17,934
68,427
20,119
11,818
3,184
205
-
-
103,753
1972
1962
1997
2005
2005
2005
2006
2010
-
-
8,558,275 $ 4,518,251 $
-
9,964,753 $
128,651
-
3,144,007 $ 4,558,181 $
128,651
128,651
13,068,830 $ 17,627,011 $
98,453
3,095,037
$
188
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Notes:
(1)
(2)
(3)
(4)
Initial cost is cost as of January 30, 1982 (the date on which Vornado commenced real estate operations)
unless acquired subsequent to that date see Column H.
The net basis of the Company’s assets and liabilities for tax purposes is approximately $3.6 billion lower
than the amount reported for financial statement purposes.
Date of original construction –– many properties have had substantial renovation or additional construction
–– see Column D.
Depreciation of the buildings and improvements are calculated over lives ranging from the life of the lease
to forty years.
189
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(AMOUNTS IN THOUSANDS)
The following is a reconciliation of real estate assets and accumulated depreciation:
Real Estate
Balance at beginning of period
Additions during the period:
Land
Buildings & improvements
Less: Assets sold and written-off
Balance at end of period
Accumulated Depreciation
Balance at beginning of period
Additions charged to operating expenses
Less: Accumulated depreciation on assets
sold and written-off
Balance at end of period
Year Ended December 31,
2010
2009
2011
$ 17,387,701 $ 17,293,970 $ 17,140,726
33,481
315,762
17,736,944
109,933
-
601,136
1,741,862
447,892
$ 17,627,011 $ 17,387,701 $ 17,293,970
347,345
324,114
17,965,429
577,728
$
$
2,715,046 $
452,793
3,167,839
2,395,608 $
428,788
2,824,396
2,068,357
433,785
2,502,142
72,802
3,095,037 $
109,350
2,715,046 $
106,534
2,395,608
190
EXHIBIT INDEX
Exhibit No.
3.1
3.2
- Articles of Restatement of Vornado Realty Trust, as filed with the State
Department of Assessments and Taxation of Maryland on July 30, 2007 - Incorporated
by reference to Exhibit 3.75 to Vornado Realty Trust’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2007 (File No. 001-11954), filed on July 31, 2007
- Amended and Restated Bylaws of Vornado Realty Trust, as amended on March 2, 2000 -
Incorporated by reference to Exhibit 3.12 to Vornado Realty Trust’s Annual Report on
Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on
March 9, 2000
3.3
- Articles Supplementary, 6.875% Series J Cumulative Redeemable Preferred Shares of
Beneficial Interest, liquidation preference $25.00 per share, no par value - Incorporated by
reference to Exhibit 3.2 of Vornado Realty Trust's Registration Statement on Form 8-A
(File No. 001-11954), filed on April 20, 2011
3.4
- Second Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P.,
dated as of October 20, 1997 (the “Partnership Agreement”) – Incorporated by reference
to Exhibit 3.26 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003
*
*
*
*
3.5
- Amendment to the Partnership Agreement, dated as of December 16, 1997 – Incorporated by
*
reference to Exhibit 3.27 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003
3.6
- Second Amendment to the Partnership Agreement, dated as of April 1, 1998 – Incorporated
by reference to Exhibit 3.5 to Vornado Realty Trust’s Registration Statement on Form S-3
(File No. 333-50095), filed on April 14, 1998
3.7
- Third Amendment to the Partnership Agreement, dated as of November 12, 1998 -
Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on
Form 8-K (File No. 001-11954), filed on November 30, 1998
3.8
- Fourth Amendment to the Partnership Agreement, dated as of November 30, 1998 -
Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on
Form 8-K (File No. 001-11954), filed on February 9, 1999
*
*
*
3.9
- Fifth Amendment to the Partnership Agreement, dated as of March 3, 1999 - Incorporated by
*
reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on March 17, 1999
3.10
3.11
3.12
- Sixth Amendment to the Partnership Agreement, dated as of March 17, 1999 - Incorporated
by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on July 7, 1999
- Seventh Amendment to the Partnership Agreement, dated as of May 20, 1999 - Incorporated
by reference to Exhibit 3.3 to Vornado Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on July 7, 1999
- Eighth Amendment to the Partnership Agreement, dated as of May 27, 1999 - Incorporated
by reference to Exhibit 3.4 to Vornado Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on July 7, 1999
3.13
- Ninth Amendment to the Partnership Agreement, dated as of September 3, 1999 -
Incorporated by reference to Exhibit 3.3 to Vornado Realty Trust’s Current Report on
Form 8-K (File No. 001-11954), filed on October 25, 1999
*
*
*
*
*
_______________________
Incorporated by reference.
191
3.14
- Tenth Amendment to the Partnership Agreement, dated as of September 3, 1999 -
Incorporated by reference to exhibit 3,4 to Vornado Realty Trust's Current Report on
Form 8-K (File No. 001-11954), filed on October 25, 1999
3.15
- Eleventh Amendment to the Partnership Agreement, dated as of November 24, 1999 -
Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on
Form 8-K (File No. 001-11954), filed on December 23, 1999
3.16
- Twelfth Amendment to the Partnership Agreement, dated as of May 1, 2000 - Incorporated
by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on May 19, 2000
3.17
- Thirteenth Amendment to the Partnership Agreement, dated as of May 25, 2000 -
Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on
Form 8-K (File No. 001-11954), filed on June 16, 2000
3.18
- Fourteenth Amendment to the Partnership Agreement, dated as of December 8, 2000 -
Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on
Form 8-K (File No. 001-11954), filed on December 28, 2000
3.19
- Fifteenth Amendment to the Partnership Agreement, dated as of December 15, 2000 -
Incorporated by reference to Exhibit 4.35 to Vornado Realty Trust’s Registration
Statement on Form S-8 (File No. 333-68462), filed on August 27, 2001
3.20
3.21
- Sixteenth Amendment to the Partnership Agreement, dated as of July 25, 2001 - Incorporated
by reference to Exhibit 3.3 to Vornado Realty Trust’s Current Report on Form 8-K
(File No. 001 11954), filed on October 12, 2001
- Seventeenth Amendment to the Partnership Agreement, dated as of September 21, 2001 -
Incorporated by reference to Exhibit 3.4 to Vornado Realty Trust’s Current Report on
Form 8 K (File No. 001-11954), filed on October 12, 2001
3.22
- Eighteenth Amendment to the Partnership Agreement, dated as of January 1, 2002 -
Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on
Form 8-K/A (File No. 001-11954), filed on March 18, 2002
3.23
3.24
- Nineteenth Amendment to the Partnership Agreement, dated as of July 1, 2002 - Incorporated
by reference to Exhibit 3.47 to Vornado Realty Trust’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2002 (File No. 001-11954), filed on August 7, 2002
- Twentieth Amendment to the Partnership Agreement, dated April 9, 2003 - Incorporated by
reference to Exhibit 3.46 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003
3.25
- Twenty-First Amendment to the Partnership Agreement, dated as of July 31, 2003 -
Incorporated by reference to Exhibit 3.47 to Vornado Realty Trust’s Quarterly Report
on Form 10-Q for the quarter ended September 30, 2003 (File No. 001-11954), filed on
November 7, 2003
3.26
3.27
- Twenty-Second Amendment to the Partnership Agreement, dated as of November 17, 2003 –
Incorporated by reference to Exhibit 3.49 to Vornado Realty Trust’s Annual Report on
Form 10-K for the year ended December 31, 2003 (File No. 001-11954), filed on
March 3, 2004
- Twenty-Third Amendment to the Partnership Agreement, dated May 27, 2004 – Incorporated
by reference to Exhibit 99.2 to Vornado Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on June 14, 2004
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
_______________________
Incorporated by reference.
192
3.28
- Twenty-Fourth Amendment to the Partnership Agreement, dated August 17, 2004 –
Incorporated by reference to Exhibit 3.57 to Vornado Realty Trust and Vornado Realty
L.P.’s Registration Statement on Form S-3 (File No. 333-122306), filed on
January 26, 2005
3.29
- Twenty-Fifth Amendment to the Partnership Agreement, dated November 17, 2004 –
Incorporated by reference to Exhibit 3.58 to Vornado Realty Trust and Vornado Realty
L.P.’s Registration Statement on Form S-3 (File No. 333-122306), filed on
January 26, 2005
3.30
- Twenty-Sixth Amendment to the Partnership Agreement, dated December 17, 2004 –
Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on
Form 8-K (File No. 000-22685), filed on December 21, 2004
3.31
- Twenty-Seventh Amendment to the Partnership Agreement, dated December 20, 2004 –
Incorporated by reference to Exhibit 3.2 to Vornado Realty L.P.’s Current Report on
Form 8-K (File No. 000-22685), filed on December 21, 2004
3.32
- Twenty-Eighth Amendment to the Partnership Agreement, dated December 30, 2004 -
Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on
Form 8-K (File No. 000-22685), filed on January 4, 2005
*
*
*
*
*
3.33
- Twenty-Ninth Amendment to the Partnership Agreement, dated June 17, 2005 - Incorporated
*
by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K
(File No. 000-22685), filed on June 21, 2005
3.34
- Thirtieth Amendment to the Partnership Agreement, dated August 31, 2005 - Incorporated by
*
reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K
(File No. 000-22685), filed on September 1, 2005
3.35
- Thirty-First Amendment to the Partnership Agreement, dated September 9, 2005 -
Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on
Form 8-K (File No. 000-22685), filed on September 14, 2005
3.36
- Thirty-Second Amendment and Restated Agreement of Limited Partnership, dated as of
December 19, 2005 – Incorporated by reference to Exhibit 3.59 to Vornado Realty L.P.’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2006
(File No. 000-22685), filed on May 8, 2006
3.37
- Thirty-Third Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of April 25, 2006 – Incorporated by reference to Exhibit 10.2 to
Vornado Realty Trust’s Form 8-K (File No. 001-11954), filed on May 1, 2006
3.38
- Thirty-Fourth Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of May 2, 2006 – Incorporated by reference to Exhibit 3.1 to
Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on
May 3, 2006
3.39
- Thirty-Fifth Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of August 17, 2006 – Incorporated by reference to Exhibit 3.1 to
Vornado Realty L.P.’s Form 8-K (File No. 000-22685), filed on August 23, 2006
3.40
- Thirty-Sixth Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of October 2, 2006 – Incorporated by reference to Exhibit 3.1 to
Vornado Realty L.P.’s Form 8-K (File No. 000-22685), filed on January 22, 2007
*
*
*
*
*
*
*
_______________________
Incorporated by reference.
193
3.41
- Thirty-Seventh Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.1 to
Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on
June 27, 2007
3.42
- Thirty-Eighth Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.2 to
Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on
June 27, 2007
3.43
- Thirty-Ninth Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.3 to
Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on
June 27, 2007
3.44
- Fortieth Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.4 to
Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on
June 27, 2007
3.45
- Forty-First Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of March 31, 2008 – Incorporated by reference to Exhibit 3.44 to
Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31,
2008 (file No. 001-11954), filed on May 6, 2008
*
*
*
*
*
3.46
- Forty-Second Amendment to Second Amended and Restated Agreement of Limited Partnership, *
dated as of December 17, 2010 – Incorporated by reference to Exhibit 99.1 to Vornado
Realty L.P.'s Current Report on Form 8-K (File No. 000-22685), filed on December 21, 2010
3.47
- Forty-Third Amendment to Second Amended and Restated Agreement of Limited Partnership,
*
dated as of April 20, 2011 – Incorporated by reference to Exhibit 3.1 to Vornado
Realty L.P.'s Current Report on Form 8-K (File No. 000-22685), filed on April 21, 2011
4.1
4.2
10.1
10.2
-
-
Indenture, dated as of November 25, 2003, between Vornado Realty L.P. and The Bank of
New York, as Trustee - Incorporated by reference to Exhibit 4.10 to Vornado Realty
Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005
(File No. 001-11954), filed on April 28, 2005
Indenture, dated as of November 20, 2006, among Vornado Realty Trust, as Issuer, Vornado
Realty L.P., as Guarantor and The Bank of New York, as Trustee – Incorporated by
reference to Exhibit 4.1 to Vornado Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on November 27, 2006
Certain instruments defining the rights of holders of long-term debt securities of Vornado
Realty Trust and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation
S-K. Vornado Realty Trust hereby undertakes to furnish to the Securities and Exchange
Commission, upon request, copies of any such instruments.
- Master Agreement and Guaranty, between Vornado, Inc. and Bradlees New Jersey, Inc. dated
as of May 1, 1992 - Incorporated by reference to Vornado, Inc.’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 1992 (File No. 001-11954), filed May 8, 1992
- Registration Rights Agreement between Vornado, Inc. and Steven Roth, dated December 29,
1992 - Incorporated by reference to Vornado Realty Trust’s Annual Report on Form 10-K
for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993
______________________
*
*
*
*
*
Incorporated by reference.
194
10.3
**
- Stock Pledge Agreement between Vornado, Inc. and Steven Roth dated December 29, 1992
- Incorporated by reference to Vornado, Inc.’s Annual Report on Form 10-K for the year
ended December 31, 1992 (File No. 001-11954), filed February 16, 1993
*
10.4
**
- Management Agreement between Interstate Properties and Vornado, Inc. dated July 13, 1992
*
- Incorporated by reference to Vornado, Inc.’s Annual Report on Form 10-K for the year
ended December 31, 1992 (File No. 001-11954), filed February 16, 1993
10.5
**
- Employment Agreement, dated as of April 15, 1997, by and among Vornado Realty Trust,
*
The Mendik Company, L.P. and David R. Greenbaum - Incorporated by reference to
Exhibit 10.4 to Vornado Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on April 30, 1997
10.6
**
- Letter agreement, dated November 16, 1999, between Steven Roth and Vornado Realty Trust
- Incorporated by reference to Exhibit 10.51 to Vornado Realty Trust’s Annual Report on
Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on
March 9, 2000
*
10.7
- Agreement and Plan of Merger, dated as of October 18, 2001, by and among Vornado Realty
*
Trust, Vornado Merger Sub L.P., Charles E. Smith Commercial Realty L.P., Charles E.
Smith Commercial Realty L.L.C., Robert H. Smith, individually, Robert P. Kogod,
individually, and Charles E. Smith Management, Inc. - Incorporated by reference to
Exhibit 2.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954),
filed on January 16, 2002
10.8
10.9
- Tax Reporting and Protection Agreement, dated December 31, 2001, by and among Vornado,
Vornado Realty L.P., Charles E. Smith Commercial Realty L.P. and Charles E. Smith
Commercial Realty L.L.C. - Incorporated by reference to Exhibit 10.3 to Vornado Realty
Trust’s Current Report on Form 8-K/A (File No. 1-11954), filed on March 18, 2002
- Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated
March 8, 2002 - Incorporated by reference to Exhibit 10.7 to Vornado Realty Trust’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2002
(File No. 001-11954), filed on May 1, 2002
*
*
10.10
- First Amendment, dated October 31, 2002, to the Employment Agreement between Vornado
*
Realty Trust and Michael D. Fascitelli, dated March 8, 2002 - Incorporated by reference
to Exhibit 99.6 to the Schedule 13D filed by Michael D. Fascitelli on November 8, 2002
10.11 **
- Amendment to Real Estate Retention Agreement, dated as of July 3, 2002, by and between
Alexander’s, Inc. and Vornado Realty L.P. - Incorporated by reference to Exhibit
10(i)(E)(3) to Alexander’s Inc.’s Quarterly Report for the quarter ended June 30, 2002
(File No. 001-06064), filed on August 7, 2002
10.12 **
- 59th Street Real Estate Retention Agreement, dated as of July 3, 2002, by and between
Vornado Realty L.P., 731 Residential LLC and 731 Commercial LLC - Incorporated by
reference to Exhibit 10(i)(E)(4) to Alexander’s Inc.’s Quarterly Report for the quarter
ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002
*
*
10.13
- Amended and Restated Management and Development Agreement, dated as of July 3, 2002,
*
by and between Alexander's, Inc., the subsidiaries party thereto and Vornado
Management Corp. - Incorporated by reference to Exhibit 10(i)(F)(1) to Alexander's
Inc.'s Quarterly Report for the quarter ended June 30, 2002 (File No. 001-06064),
filed on August 7, 2002
*
**
_______________________
Incorporated by reference.
Management contract or compensatory agreement.
195
10.14
- Amendment dated May 29, 2002, to the Stock Pledge Agreement between Vornado Realty
*
Trust and Steven Roth dated December 29, 1992 - Incorporated by reference to Exhibit 5
of Interstate Properties’ Schedule 13D/A dated May 29, 2002 (File No. 005-44144), filed
on May 30, 2002
10.15
**
- Vornado Realty Trust’s 2002 Omnibus Share Plan - Incorporated by reference to Exhibit 4.2
to Vornado Realty Trust’s Registration Statement on Form S-8 (File No. 333-102216)
filed December 26, 2002
10.16
**
- Form of Stock Option Agreement between the Company and certain employees –
Incorporated by reference to Exhibit 10.77 to Vornado Realty Trust’s
Annual Report on Form 10-K for the year ended December 31, 2004
(File No. 001-11954), filed on February 25, 2005
10.17
**
- Form of Restricted Stock Agreement between the Company and certain employees –
Incorporated by reference to Exhibit 10.78 to Vornado Realty Trust’s Annual Report on
Form 10-K for the year ended December 31, 2004 (File No. 001-11954), filed on
February 25, 2005
10.18
**
- Amendment, dated March 17, 2006, to the Vornado Realty Trust Omnibus Share Plan –
Incorporated by reference to Exhibit 10.50 to Vornado Realty Trust’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2006 (File No. 001-11954), filed on
May 2, 2006
10.19
**
- Form of Vornado Realty Trust 2006 Out-Performance Plan Award Agreement, dated as of
April 25, 2006 – Incorporated by reference to Exhibit 10.1 to Vornado Realty Trust’s
Form 8-K (File No. 001-11954), filed on May 1, 2006
10.20
**
10.21
**
- Form of Vornado Realty Trust 2002 Restricted LTIP Unit Agreement – Incorporated by
reference to Vornado Realty Trust’s Form 8-K (Filed No. 001-11954), filed on
May 1, 2006
- Amendment No.2, dated May 18, 2006, to the Vornado Realty Trust Omnibus Share Plan
– Incorporated by reference to Exhibit 10.53 to Vornado Realty Trust’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2006 (File No. 001-11954), filed
on August 1, 2006
*
*
*
*
*
*
*
10.22
**
- Amended and Restated Employment Agreement between Vornado Realty Trust and Joseph
*
Macnow dated July 27, 2006 – Incorporated by reference to Exhibit 10.54 to Vornado
Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006
(File No. 001-11954), filed on August 1, 2006
10.23
**
- Amendment, dated October 26, 2006, to the Vornado Realty Trust Omnibus Share Plan –
Incorporated by reference to Exhibit 10.54 to Vornado Realty Trust’s Quarterly Report
on Form 10-Q for the quarter ended September 30, 2006 (File No. 001-11954), filed on
October 31, 2006
10.24
**
- Amendment to Real Estate Retention Agreement, dated January 1, 2007, by and between
Vornado Realty L.P. and Alexander’s Inc. – Incorporated by reference to Exhibit 10.55
to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended
December 31, 2006 (File No. 001-11954), filed on February 27, 2007
*
*
*
**
_______________________
Incorporated by reference.
Management contract or compensatory agreement.
196
10.25
**
- Amendment to 59th Street Real Estate Retention Agreement, dated January 1, 2007, by and
among Vornado Realty L.P., 731 Retail One LLC, 731 Restaurant LLC, 731 Office One
LLC and 731 Office Two LLC. – Incorporated by reference to Exhibit 10.56 to
Vornado Realty Trust’s Annual Report on Form 10-K for the year ended
December 31, 2006 (File No. 001-11954), filed on February 27, 2007
*
10.26
**
- Employment Agreement between Vornado Realty Trust and Mitchell Schear, as of April 19,
*
2007 – Incorporated by reference to Exhibit 10.46 to Vornado Realty Trust’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 001-11954),
filed on May 1, 2007
10.27
**
- Form of Vornado Realty Trust 2002 Omnibus Share Plan Non-Employee Trustee Restricted
*
LTIP Unit Agreement – Incorporated by reference to Exhibit 10.45 to Vornado Realty
Trust’s Annual Report on Form 10-K for the year ended December 31, 2007 (File No.
001-11954) filed on February 26, 2008
10.28
**
- Form of Vornado Realty Trust 2008 Out-Performance Plan Award Agreement – Incorporated
*
by reference to Exhibit 10.46 to Vornado Realty Trust’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2008 (File No. 001-11954) filed on May 6, 2008
10.29
**
- Amendment to Employment Agreement between Vornado Realty Trust and Michael D.
Fascitelli, dated December 29, 2008. Incorporated by reference to Exhibit 10.47 to
Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31,
2008 (File No. 001-11954) filed on February 24, 2009
10.30
**
- Amendment to Employment Agreement between Vornado Realty Trust and Joseph Macnow,
dated December 29, 2008. Incorporated by reference to Exhibit 10.48 to Vornado Realty
Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No.
001-11954) filed on February 24, 2009
10.31
**
- Amendment to Employment Agreement between Vornado Realty Trust and David R.
Greenbaum, dated December 29, 2008. Incorporated by reference to Exhibit 10.49 to
Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31,
2008 (File No. 001-11954) filed on February 24, 2009
10.32
**
- Amendment to Indemnification Agreement between Vornado Realty Trust and David R.
Greenbaum, dated December 29, 2008. Incorporated by reference to Exhibit 10.50 to
Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31,
2008 (File No. 001-11954) filed on February 24, 2009
10.33
**
- Amendment to Employment Agreement between Vornado Realty Trust and Mitchell N.
Schear, dated December 29, 2008. Incorporated by reference to Exhibit 10.51 to Vornado
Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File
No. 001-11954) filed on February 24, 2009
*
*
*
*
*
10.34
**
- Vornado Realty Trust's 2010 Omnibus Share Plan. Incorporated by reference to Exhibit 10.41 to
*
Vornado Realty Trust's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010
(File No. 001-11954) filed on August 3, 2010
_______________________
*
**
Incorporated by reference.
Management contract or compensatory agreement.
197
10.35 **
- Employment Agreement between Vornado Realty Trust and Michael J. Franco, dated
September 24, 2010. Incorporated by reference to Exhibit 10.42 to Vornado Realty Trust's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 (File No. 001-11954)
filed on November 2, 2010
10.36 **
- Form of Vornado Realty Trust 2010 Omnibus Share Plan Stock Agreement. Incorporated by
reference to Exhibit 10.42 to Vornado Realty Trust's Annual Report on Form 10-K for the year
ended December 31, 2010 (File No. 001-11954) filed on February 23, 2011
10.37 **
- Form of Vornado Realty Trust 2010 Omnibus Share Plan Restricted LTIP Unit Agreement
Incorporated by reference to Exhibit 10.43 to Vornado Realty Trust's Annual Report on Form
10-K for the year ended December 31, 2010 (File No. 001-11954) filed on February 23, 2011
10.38 **
- Form of Vornado Realty Trust 2010 Omnibus Share Plan Restricted Stock Agreement
Incorporated by reference to Exhibit 10.44 to Vornado Realty Trust's Annual Report on Form
10-K for the year ended December 31, 2010 (File No. 001-11954) filed on February 23, 2011
10.39 **
10.40 **
- Letter Agreement between Vornado Realty Trust and Michelle Felman, dated December 21, 2010.
Incorporated by reference to Exhibit 10.45 to Vornado Realty Trust's Annual Report on Form
10-K for the year ended December 31, 2010 (File No. 001-11954) filed on February 23, 2011
- Waiver and Release between Vornado Realty Trust and Michelle Felman, dated December 21,
2010. Incorporated by reference to Exhibit 10.46 to Vornado Realty Trust's Annual Report
on Form 10-K for the year ended December 31, 2010 (File No. 001-11954) filed on
February 23, 2011
*
*
*
*
*
*
10.41 **
- Revolving Credit Agreement dated as of June 8, 2011, by and among Vornado Realty L.P. as
*
borrower, Vornado Realty Trust as General Partner, the Banks listed on the signature pages
thereof, and J.P. Morgan Chase Bank N.A., as Administrative Agent for the Banks.
Incorporated by reference to Exhibit 10.46 to Vornado Realty Trust's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2011 (File No. 001-11954) filed on August 1, 2011
10.42 **
10.43 **
- Letter Agreement between Vornado Realty Trust and Christopher G. Kennedy, dated August 5,
2011. Incorporated by reference to Exhibit 10.47 to Vornado Realty Trust’s Quarterly Report
on Form 10-Q for the quarter ended September 30, 2011 (File No. 001-11954) filed on
November 3, 2011
- Waiver and Release between Vornado Realty Trust and Christopher G. Kennedy, dated August 5,
2011. Incorporated by reference to Exhibit 10.48 to Vornado Realty Trust’s Quarterly Report
on Form 10-Q for the quarter ended September 30, 2011 (File No. 001-11954) filed on
November 3, 2011
*
*
10.44
Revolving Credit Agreement dated on November 7, 2011, by and among Vornado Realty L.P. as
*
borrower, Vornado Realty Trust as General Partner, the Banks listed on the signature pages
thereof, and JP Morgan Chase Bank N.A., as administrative agent for the Banks.
Incorporated by reference to Exhibit 10.1 to Vornado Realty Trust’s Current Report on
Form 8-K (File No. 001-11954) filed on November 11, 2011
*
**
_______________________
Incorporated by reference.
Management contract or compensatory agreement.
198
10.45
**
- Promissory Note from Steven Roth to Vornado Realty Trust, dated December 23, 2011
12
21
23
31.1
31.2
32.1
32.2
- Computation of Ratios
- Subsidiaries of the Registrant
- Consent of Independent Registered Public Accounting Firm
- Rule 13a-14 (a) Certification of the Chief Executive Officer
- Rule 13a-14 (a) Certification of the Chief Financial Officer
- Section 1350 Certification of the Chief Executive Officer
- Section 1350 Certification of the Chief Financial Officer
101.INS
- XBRL Instance Document
101.SCH
- XBRL Taxonomy Extension Schema
101.CAL
- XBRL Taxonomy Extension Calculation Linkbase
101.DEF
- XBRL Taxonomy Extension Definition Linkbase
101.LAB
- XBRL Taxonomy Extension Label Linkbase
101.PRE
- XBRL Taxonomy Extension Presentation Linkbase
*
**
______________________
Incorporated by reference.
Management contract or compensation agreement.
199
VORNADO CORPORATE INFORMATION
TRUSTEES
STEVEN ROTH
Chairman of the Board
MICHAEL D. FASCITELLI
President and Chief Executive Officer
CANDACE K. BEINECKE
Chair of Hughes Hubbard & Reed LLP
ANTHONY W. DEERING*
Chairman of Exeter Capital, LLC
ROBERT P. KOGOD*
President of Charles E. Smith Management LLC
MICHAEL LYNNE
Principal of Unique Features
DAVID M. MANDELBAUM
Partner, Interstate Properties
RONALD G. TARGAN
President, Malt Products Corporation
DANIEL R. TISCH
Managing Member,
TowerView LLC
RICHARD R. WEST*
Dean Emeritus, Leonard N. Stern School of Business,
New York University
RUSSELL B. WIGHT, JR.
Partner, Interstate Properties
Members of the Audit Committee*
OFFICERS
STEVEN ROTH
Chairman of the Board
MICHAEL D. FASCITELLI
President and Chief Executive Officer
MARK FALANGA
President of the
Merchandise Mart Division
MICHAEL J. FRANCO
Executive Vice President –
Co-Head of Acquisitions and Capital Markets
DAVID R. GREENBAUM
President of the
New York Office Division
JOSEPH MACNOW
Executive Vice President –
Finance and Administration and
Chief Financial Officer
MITCHELL N. SCHEAR
President of the Vornado/Charles E. Smith
Washington DC Office Division
WENDY SILVERSTEIN
Executive Vice President –
Co-Head of Acquisitions and Capital Markets
COMPANY DATA
EXECUTIVE OFFICES
888 Seventh Avenue
New York, New York 10019
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
Parsippany, New Jersey
COUNSEL
Sullivan & Cromwell LLP
New York, New York
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Co.
New York, New York
MANAGEMENT CERTIFICATIONS
The Company’s Chief Executive Officer and
Chief Financial Officer provided certifications
to the Securities and Exchange Commission as
required by Section 302 of the Sarbanes-Oxley
Act of 2002 and these certifications are included
in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2011. In
addition, as required by Section 303A.12(a) of
the New York Stock Exchange (NYSE) Listed
Company Manual, on June 1, 2011 the
Company’s Chief Executive Officer submitted
to the NYSE the annual CEO certification
regarding the Company’s compliance with the
NYSE’s corporate governance listing standards.
REPORT ON FORM 10-K
Shareholders may obtain a copy of the
Company’s annual report on Form 10-K as filed
with the Securities and Exchange Commission
free of charge (except for exhibits), by writing
to the Secretary, Vornado Realty Trust,
888 Seventh Avenue, New York, New York
10019; or, visit the Company’s website at
www.vno.com and refer to the Company’s SEC
Filings.
ANNUAL MEETING
The annual meeting of shareholders of Vornado
Realty Trust, will be held at 11:30 AM on
May 24, 2012 at the Saddle Brook Marriott,
Interstate 80 and the Garden State Parkway,
Saddle Brook, New Jersey 07663.